HF 
Be 


UC-NRLF 


B   4   S7T   MbT 


Bookkeeping   Exercises 


No.  1 


Recording  Transactions,  Posting 
and  the  Trial  Balance 


For  Beginning  Bookkeeping  Students 


Net  Price  20  Cents 


PUBLISHED  BY 

South-Western  Publishing  Company 
Cincinnati,  Ohio 


BOOKKEEPING  EXERCISES 


DEVELOPING  THE  PRINCIPLES  OF  DEBITS  AxND  CREDITS, 
RECORDING  TRANSACTIONS,  THE  TRIAL  BALANCE, 
BALANCE  SHEET,  STATEMENT  OF  PROFIT 
AND  LOSS,  AND  LEDGER  CLOSING 


For  Beginning  Bookkeeping  Students 


PUBLISHED  BY 

South-Western  Publishing  Company 

Cincinnati,  Ohio 

1921 


Copyright,  1921 

SOUTH-WESTERN  PUBLISHING  COMPANY 

Cincinnati,  Ohio 


Chapter  I 

BOOKKEEPING  AND   ACCOUNTING 

§  1.  Each  Individual  requires  food,  clothing,  education,  amusement,  and 
many  other  things  necessary  for  his  comfort  and  enjoyment.  These  necessities  and 
luxuries  can  be  obtained  with  money,  which  is  the  medium  of  exchange.  The  in- 
dividual secures  money  through  a  compensation  for  services  rendered  to  others, 
income  from  investment,  or  the  profit  resulting  from  the  operations  of  a  business. 

James  Brown  is  employed  as  salesman  for  the  Citizens  Motor  Car  Co.;  his  income  is  the 
salary  received  for  the  services  rendered.  J.  W.  Smith  owns  the  building  in  which  the  Citizens 
Motor  Car  Co.  is  operated;  his  income  is  the  rent  received  from  the  building,  which  is  his  investment. 
W.  O.  Winkler  owns  the  Citizens  Motor  Car  Co.;  his  income  is  the  profit  made  by  selling  automo- 
biles at  a  price  greater  than  the  cost. 

§  2.  A  Business.  The  one  who  sells  to  the  individual  the  food,  clothing, 
education,  amusement,  or  other  things  which  he  needs  for  his  comfort  and  enjoy- 
ment, is  said  to  be  engaged  in  business,  and  the  operations  in  connection  therewith 
are  referred  to  as  a  business.  The  operations  include  the  buying  and  selling  of  the 
commodities  in  which  the  business  deals,  at  a  place  of  business  and  under  a  name 
selected  by  the  owner.  There  are  many  kinds  of  businesses,  each  supplying  a 
specific  demand;  there  are  many  businesses  of  the  same  kind,  each  undertaking  to 
supply  the  same  demand. 

John  Jones  owns  and  operates  a  drug  store  at  405  Main  Street,  known,  and  advertised  to  the 
public  as  "The  Central  Drug  Store."  Mr  Jones  is  a  business  man  because  he  operates  a  business. 
The  operations  of  his  business  include  the  buying  and  selling  of  medicine  and  drugs  as  well  as  the 
other  articles  a  drug  store  usually  handles,  and  his  business  is  referred  to  as  a  drug  business. 

§  3.  The  Purpose  of  a  Business.  A  business  is  organized  and  operated  in 
order  that  the  owner  may  make  a  profit:''  and  thus  enable  him  to  purchase  from 
others  the  material  or  services  which  his  business  does  not  provide.  The  profit 
results  from  selling  material  or  service  at  a  price  greater  than  its  cost.  If  the 
material  or  service  which  the  business  has  for  sale  is  sold  at  a  price  lower  than  its 
cost  to  the  business,  the  operations  have  resulted  in  a  loss.  The  purpose  of  a  busi- 
ness can  be  accomplished  only  after  the  material  or  service  which  it  undertakes 
to  provide  has  been  sold  to  those  who  demand  it;  no  profit  can  result  until  the 
material  or  service  has  been  sold. 

Mr.  Jones,  the  druggist  referred  to  in  the  illustration  in  Section  (§)  2,  hopes  to  make  sufficient 
profit  through  the  operations  of  his  drug  business  to  permit  him  to  purchase  food,  clothing,  education 
and  amusement  for  himself  and  family,  and  the  many  other  articles  and  services  which  are  needed 
in  everyday  life.  To  make  a  profit,  it  is  necessary  for  him  to  sell  the  articles  which  he  olTers  for  sale 
at  a  price  sufficient  to  cover  (a)  the  cost  of  the  article,  (b)  the  cost  of  operating  his  business  (rent, 
heat,  light,  etc.),  and  (c)  the  profit  needed  to  provide  those  things  necessary  for  the  comfort  and 
enjoyment  of  himself  and  family. 

§  4.  Assets,  Liabilities,  and  Proprietorship.  Property  is  any  object  of 
value  that  an  individual  or  business  may  lawfully  acquire  and  hold.  Any  one  kind 
of  property  (money,  goods  purchased  for  sale,  land,  buildings,  etc.)  owned  by  a  busi- 
ness is  referred  to  as  an  asset,  and  all  the  property  owned  by  a  business,  as  its  assets. 
An  oral  or  written  agreement  to  pay  money  at  a  future  time  is  an  obligation  or 
debt;    an  obligation  owed  by  a  business  is  referred  to  as  liability,  and  all  the 

*The  words  printed  in  italics  are  accounting  terms  and  have  a  special  meaning  when  used  in 
connection  with  the  discussion  of  bookkeeping  and  accounting.  If  the  student  does  not  understand 
the  meaning  of  these  terms  from  the  discussion  in  the  text,  the  teacher  will  give  further  explanation 
upon  request.  The  beginner  is  not  expected  to  memorize  the  meaning  of  these  terms,  but  he  should 
understand  their  use. 


483G4^ 


6  :;. :  ; /  JB^X)kREEPmG  .'AND  ACCOUNTI NG. 

obligations  of  a  business,  as  its  liabilities.  Proprietorship  refers  to  the  interest  of  the 
owner  in  the  business;  it  is  the  difference  between  the  assets  and  liabilities  of  the 
business.     Stated  in  equation   form,  assets-liabilities  =  proprietorship. 

Mr.  Jones,  the  druggist,  finds  by  actual  count  that  on  December  31  he  owns  in  connection 
with  his  drug  business,  cash  $1,500.00;  drugs,  medicines,  and  other  material  purchased  for  sale, 
$4,500.00;  and  soda  fountain  equipment  and  store  fixtures,  $2,500.00.  He  owes  the  bank  $1,000.00 
for  money  borrowed  from  it,  and  one  of  the  wholesale  drug  companies  from  which  he  buys 
medicine,  $500.00.  Total  assets,  $8,500.00,  minus  total  liabilities,  $1,500.00,  equals  proprietorship, 
$7,000.00. 

§  5.  A  Business  Transaction  is  an  exchange  of  equivalent  values;  that 
is,  the  business  receives  something  of  value  for  the  material  or  service  which  it 
sells  to  others,  and  gives  something  of  value  to  those  from  whom  it  purchases 
material  or  services.  The  value  received  may  be  an  asset,  an  operating  cost,  or  an 
obligation  (liability)  canceled;  the  value  parted  with  may  be  an  asset,  a  service 
rendered,  or  an  obligation  (liability)  created.  The  purpose  of  a  business  (§  3)  is 
accomplished  through  the  performance  of  business  transactions. 

Mr.  Jones,  the  druggist,  pays  money  for  drugs  which  he  expects  to  sell;  the  value  received 
is  the  drugs,  and  the  value  parted  with  is  the  money.  A  railroad  receives  $5.00  in  payment  for  a 
ticket;  the  value  received  is  the  money,  and  the  value  parted  with  is  the  service  rendered  the  pur- 
chaser of  the  ticket  in  transporting  him  from  one  place  to  another  as  specified  in  the  ticket.  Mr. 
Jones,  the  druggist,  pays  the  telephone  company  $5.00  for  the  use  of  his  'phone;  the  value  received 
is  the  use  of  the  'phone  (operating  cost),  and  the  value  parted  with  is  the  money.  A.  R.  Smith,  a 
farmer,  borrows  $500.00  from  a  bank;  the  value  received  by  him  is  the  money,  and  the  value  parted 
with  is  the  obligation  created  by  the  promise  to  pay  $500.00  at  a  future  time.  When  Mr.  Smith 
pays  this  obligation,  the  value  received  by  him  is  the  obligation  canceled,  and  the  value  parted  with 
is  the  money. 

§  6.  Bookkeeping  is  the  systematic  recording  of  the  transactions  performed 
by  a  business.  Accounting  is  a  term  usually  used  with  the  same  meaning  as  book- 
keeping; there  is  a  distinction  which  the  student  will  better  understand  after  he 
is  more  familiar  with  the  subject  of  bookkeeping. 

A  bookkeeper  records  the  transactions  performed  by  a  business;  an  auditor  verifies  the  book- 
keeping records;  an  accountant  installs  bookkeeping  systems,  prepares  financial  reports,  and  advises 
the  owner  in  regard  to  the  information  that  should  be  obtained  from  his  bookkeeping  records;  a 
certified  public  accountant  (C.  P.  A.)  is  one  who  has  passed  the  required  governmental  examination 
and  has  the  authority  to  practice  the  profession  of  accountancy. 

§  7.  The  Purpose  of  Bookkeeping  for  a  business  is  to  provide  a  record 
of  all  the  transactions  performed  by  the  business.  From  this  record,  the  owner 
can  determine  the  value  of  the  assets  and  liabilities  of  the  business,  the  cost  of 
operating  it,  and  the  profit  resulting  from  its  operations;  this  information  will 
enable  him  to  control  future  operations  of  the  business.  The  purpose  of  book- 
keeping for  an  individual  is  to  provide  a  record  of  his  income  from  salary  and 
investments  and  his  expenditures.  From  this  record  he  can  control  future  expendi- 
tures and  avoid  contracting  obligations  which  can  not  be  paid  from  his  income. 

Mr.  Jones,  the  druggist,  wishes  to  know  that  the  amount  of  money  owned  by  the  business 
is  correct  according  to  the  transactions  performed.  He  requires  a  record  of  all  money  received  and 
all  money  paid;  the  difference  between  the  total  receipts  and  total  payments  should  correspond 
with  the  money  owned  by  the  business.  Robert  Brown,  who  receives  a  salary  of  $2,500.00  a  year, 
wishes  to  know  that  his  expenses  will  not  exceed  his  income.  He  records  his  expenses  (rent,  gas. 
coal,  clothing,  food,  etc.)  and  salary  received;  the  difference  between  the  salary  and  the  total  expenses 
is  the  excess  of  his  income  over  his  cost  of  living. 

§  8.  An  Account  is  a  record  of  all  the  transactions  with  any  one  asset, 
liability,  operating  cost,  profit,  or  loss  collected  under  a  specific  heading;  this 
heading  is  designated  as  the  name  of  the  account.  It  requires  two  accounts  to 
record  a  transaction,  one  to  record  the  value  received  and  the  other  the  value 
parted  with.  The  record  in  an  account  should  be  arranged  to  distinguish  between 
values  received  and  values  parted  with.  Thus,  if  an  account  is  to  show  a  record 
of  money  received  and  paid  by  a  business,  amounts  received  should  be  recorded 
in  such  a  way  as  to  distinguish  them  from  amounts  paid.     For  this  reason  it  is 


BOOKKEEPING  AND  ACCOUNTING. 


customary  to  provide  a  special  ruled  form  for  the  recording  of  transactions  in  an 
account.  Illustration  No.  i  shows  one  form  of  ruling;  others  will  be  explained 
and    illustrated    later. 

NAME  OF  THE  ACCOUNT 
Values  Received  Values  Parted  With 


Year 
Month 

Day 

Any  special 
explanation 
deemed  nec- 

Page 

for 

refer- 

Dollars 

Cents 

Year 
Month 

Day 

Any  special 
explanation 
deemed  7iec- 

Page 

for 

refer- 

Dollars 

Cents 

(I) 

(2) 

essary. 
(3) 

ence 

(4) 

(5) 

(6) 

(I) 

(2) 

essarv. 
(3) 

ence 

(4) 

(5) 

(6) 

Illustration  No.   i,  The  Account. 

EXPLANATION.  The  name  of  the  account  is  written  above  the  ruled  form  provided  for 
recording  transactions  affecting  the  account.  The  double  line  in  the  center  separates  values  received 
and  values  parted  with.  Columns  i  and  2  are  for  the  date,  and  columns  5  and  6,  for  the  value  in 
dollars  and  cents  of  each  transaction  affecting  the  account.  Column  3  is  used  when  special  infor- 
mation is  necessary,  and  column  4,  when  the  transaction  is  recorded  separate  from  the  account  and 
transferred  to  it.  The  numbers  of  the  columns  on  either  side  are  the  same  because  they  are  used  for 
the  same  purpose. 

Applying  the  discussion  of  an  account  to  the  illustration  in  connection  with  §7,  the  money 
received  by  Mr.  Jones,  the  druggist,  would  be  recorded  on  one  side  of  an  account,  the  purpose  of 
which  is  to  show  a  record  of  money  received  and  paid,  and  the  money  paid  would  be  recorded  on  the 
opposite  side  of  the  same  account.    The  difference  between  the  two  sides  is  the  cash  balance  (§11). 

§  9.  The  Name  of  an  Account  should  indicate  the  nature  of  the  asset, 
liability,  operating  cost,  profit,  or  loss,  which  its  balance  represents.  Technical 
names  should  be  avoided  so  that  any  one  who  can  understand  what  he  reads  may 
be  able  to  interpret  the  name  of  the  account.  Custom  has  established  the  names 
of  many  accounts.  Thus  merchandise  purchased  is  recorded  in  an  account  named 
"Purchases;"  merchandise  sold,  in  an  account  named  "Sales;"  money  received 
and  paid  by  the  business,  in  an  account  named  "Cash;"  transactions  with  an 
individual,  in  an  account  with  his  name.  The  names  of  the  various  accounts  needed 
in  connection  with  the  recording  of  transactions  for  a  business  and  the  purpose 
of   each    will    be   discussed    in    subsequent   chapters. 

§  10.  Debit  and  Credit  are  accounting  terms  which  apply  to  the  two 
sides  of  an  account,  "debit"  referring  to  the  left  side  and  "credit"  to  the  right  side. 
When  a  transaction  is  performed,  the  value  received  is  recorded  on  the  debit  side  of 
the  account  affected,  and  the  value  parted  with  on  the  credit  side  of  the  account 
affected.  \'alues  recorded  on  the  debit  side  of  an  account  are  referred  to  as  "debits," 
and  those  recorded  on  the  credit  side  of  an  account,  as  "credits." 

Applying  the  illustrations  under  §§  7  ?nd  8,  the  values  received  in  each  case  would  be  recorded 
on  the  debit  side,  and  the  values  parted  with,  on  the  credit  side.  Thus  Mr.  Jones,  the  druggist 
would  expect  all  the  money  received  to  be  recorded  on  the  debit  side  of  the  account  with  money, 
and  all  the  money  paid  on  the  credit  side. 

§  11.  The  Balance  of  an  Account  is  the  difference  between  the  total  debits 
and  the  total  credits  of  the  account.  The  balance  of  an  account  shows  the  value 
of  an  asset  or  a  liability,  or  the  amount  of  a  profit  or  a  loss.*  If  the  debit  side  of  an 
account  is  the  larger,  the  balance  is  referred  to  as  a  "debit  balance;"  if  the  credit 
side  is  the  larger,  as  a  "credit  balance."  Debit  balances  are  assets  or  losses,  and 
credit  balances  are  liabilities  or  profits.  The  term  "loss"  as  used  here  includes  the 
operating  cost  of  the  business  as  well  as  direct  losses  resulting  from  transactions. 

An  account  is  "open"  when  the  total  of  one  side  is  greater  than  the  total  of 
the  other  side,  and  is  "closed"  or  "in  balance"  when  the  totals  of  both  sides  are 
equal.  If  the  balance  of  an  account  shows  the  value  of  an  asset  or  a  liabilit}^  it  is 
sometimes  referred  to  as  a  real  account,  and  if  it  shows  a  profit  or  a  loss,  as  a  nominal 
account. 

*Negative  accounts  and  other  exceptions  will  be  discussed  later. 


BOOKKEEPING  AND  ACCOUNTING. 


QUESTIONS 

1.  Would  it  be  advisable  for  a  person  who  receives  a  salary  for  his  services  to 

keep  a  record  of  the  transactions  which  he  performs  in  connection  with  his 
affairs?     Why? 

2.  Name  some  of  the  transactions  which  the  individual  would  perform  in  con- 

nection with  his  affairs. 

3.  Would  you  think  it  advisable  for  a  person  who  receives  a  salary  to  appropriate 

fixed  amounts  for  living  expenses,  clothing,  charit>%  and  savings?     State 
reasons  for  answer. 

4.  Would  it  be  advisable  for  the  owner  of  an  apartment  building  with  six  apart- 

ments to  keep  a  record  of  the  transactions  performed  in  connection  with 

the  operation  of  the  building?     Why? 
Name  some  of  the  transactions  which  the  owner  of  the  apartment  l)uilding 

would  perform. 
How  would  he  ascertain  whether  the  ownership  of  the  apartments  was  a  profit- 
able investment? 
Would  you  consider  a  contractor  who  undertakes  to  build   houses,   roads, 

sidewalks,  etc.,  a  business  man?     Why? 
Name  some  of  the  transactions  which  he  would  perform  in  connection  with 

the  operations  of  his  business. 
Is  the  payment  of  street  car  fare  by  the  individual  who  rides  on  the  car  a 

business  transaction  from  the  standpoint  of  the  street  car  company? 

10.  Name  some  of  the  assets  which  would  be  needed  and  some  of  the  liabilities 

which  might  be  incurred  in  connection  with  the  operation  of  a  railroad. 

11.  Name  some  of  the  assets  and  liabilities  in  connection  with  the  operation  of  a 

grocery  business. 

12.  Name  some  of  the  assets  of  a  dry  goods  store. 

13.  Would  you  consider  it  advisable  for  those  in  charge  of  a  city  government  to 

make  a  record  of  the  transactions  completed  in  connection  with  ijfs  oper- 
ations?    Why? 

14.  Name  some  of  the  transactions  which  would  be  recorded  in  connection  with 

the  operations  of  a  city  government. 

15.  Is  an  automobile  truck,  owned  and  used  by  the  grocer  for  delivering  groceries, 

one  of   the   assets   of   his   business? 

16.  Name  some  of  the  operating  costs  in  connection  with  the  operations  of  a 

steamer  which  carries  freight  and  passengers. 

17.  Name  some  of  the  assets  which  would  be  needed  and  the  liabilities  incurred 

in  connection  with  the  operations  of  this  steamer. 
i<S.     Name  some  of  the  operating  costs  in  connection  with  the  publication  of  a 
daily  newspaper. 

19.  Name  some  of  the  assets  and  liabilities  in  connection  with  the  operations  of  a 

newspaper. 

20.  Would  the  farmer  be  regarded  as  a  business  man? 

21.  Name  some  of  the  transactions  which  would  occur  in  connection  with  the 

operations  of  a  farm. 

22.  Name  some  of  the  assets  needed  by  the  farmer  and  some  of  the  liabilities  he 

might  incur  in  connection  with  the  operations  of  his  farm. 
2}^.     Name  some  of  the  operating  expenses  which  it  would  be  necessary  for  the 
farmer  to  pay  in  connection  with  the  operations  of  his  farm. 

24.  Name  some  of  the  transactions  which  a  physician  would  perform  in  connection 

■  with  his  practice. 

25.  Name  three  businesses  of  the  same  kind.     Name  three  businesses  of  different 

kinds. 


Chapter  II 


RECORDING  TRANSACTIONS 

§  12.  The  Purpose  of  Accounting  (bookkeeping)  is  to  provide  the  owner 
with  the  information  which  will  enable  him  to  know  the  results  of  the  operations 
of  his  business  and  to  control  future  operations.  This  information  can  be  obtained 
only  by  recording  each  transaction  as  it  occurs. 

§  13.  Method  of  Recording  Transactions.  The  bookkeeper  records  the 
transactions  as  they  occur  and  in  the  order  of  their  occurrence.  Each  transaction 
involves  a  value  received  and  a  value  parted  with,  hence  a  record  in  two  accounts. 
Each  transaction  may  be  recorded  direct  in  the  accounts  affected  by  it  or  in  a 
separate  record  and  transferred  to  the  accounts.  For  the  purpose  of  instruction, 
both  methods  are  illustrated,  but  in  practice,  transactions  are  always  recorded 
separate  from  the  account  and  transferred  to  it.  The  recording  of  transactions 
involves  the  use  of  books  of  account  because  transactions  can  not  b'  recorded 
without  paper  on  which  to  record  them. 

§  14.  Books  of  Account  are  bound  or  loose-leaf,  and  ruled  to  meet  particular 
needs.  The  various  books  of  account  used  in  connection  with  the  recording  of 
transactions  will  be  explained  and  illustrated  as  they  are  introduced  in  connection 
with  exercises  in  this  text.  In  the  first  three  exercises,  the  ledger  is  the  only  book 
of  account  required. 

§  15.  The  Ledger  is  a  bound  book,  loose-leaf  book,  or  cards  with  ruling  to 
contain  a  record  of  transactions  in  accounts.  The  name  of  the  account  is  written 
at  the  top  of  the  page  and  each  transaction  recorded  on  a  horizontal  blue  line  on 
the  opposite  sides  of  two  accounts.  If  an  entire  page  is  not  needed  in  connection 
with  recording  the  transactions  for  an  account,  the  name  of  the  account  may  be 
written  across  the  page  in  a  place  other  than  the  top.  If  more  than  one  account 
is  written  on  a  page,  it  is  customary  to  indicate  the  name  of  a  new  account  by 
drawing  double  red  lines  either  all  the  way  across  the  page  as  in  Illustration  No. 
3,  or  beneath  the  name  of  the  account.  Illustration  No.  2  shows  one  form  of  ruling 
for  a  ledger  page. 

The  number  of  accounts  in  the  ledger  depends  entirely  on  the  nature  of  the 
operations  of  the  business  and  the  extent  of  these  operations.  The  various  accounts 
that  are  usually  found  in  the  ledger  will  be  discussed  as  they  are  needed  in  connection 
with  the  explanation  of  the  accounts  and  exercises  requiring  the  recording  of  trans- 
actions in  them.  Accounts  with  Cash,  Purchases,  and  Sales  are  discussed  and  the 
recording  of  transactions  affecting  them  illustrated  in  this  chapter. 


— .  — I — { 1 . -- ,-  -  ' 

I 


Illustration  No.  2,  One  Form  of  Ruling  for  a  Ledger 

9 


10         CASH,  PURCHASES,  AND  SALES  ACCOUNTS 

CASH  ACCOUNT 

§  16.  The  Purpose  of  this  Account  is  to  show  a  record  of  all  the  transac- 
tions in  which  cash  is  received  and  paid.  "Cash"  is  a  term  applied  to  money  or  any 
commercial  paper  which  the  bank  will  accept  at  its  face  value  a"s  money.  The 
various  forms  of  commercial  paper  which  are  regarded  as  cash  will  be  explained  and 
illustrated  later. 

Debit  the  Cash  Account:  Credit  the  Cash  Account: 

*[  I.     For  cash  received.  ^2.     For  cash  paid. 

^1  3.  The  Balance  of  the  Cash  Account  shows  the  amount  of  cash  which 
belongs  to  the  business  as  a  result  of  the  cash  transactions  completed;  it  is  one  of 
the  assets  of  the  business.  This  cash  may  be  in  the  safe,  in  the  bank  for  safe- 
keeping, or  a  part  in  each  place. 

^  4.  Proving  Cash.  Since  the  Cash  account  is  a  record  of  all  the  cash  received 
and  paid,  the  balance  should  be  the  same  as  the  cash  belonging  to  the  business.  If 
there  has  been  an  error  in  making  change,  or  a  transaction  affecting  cash  has  not 
been  recorded,  it  is  obvious  that  the  balance  of  the  account  will  not  be  the  same 
as  the  cash  on  hand.  It  is  customary  in  business  to  prove  the  cash  record  with 
the  cash  on  hand  at  the  end  of  each  business  day.  This  proof  is  effected  by 
counting  the  cash  and  comparing  the  amount  with  the  balance  of  the  Cash  account. 

PURCHASES  ACCOUNT 

§  17.  The  Purpose  of  this  Account  is  to  show  the  net  cost  of  all  the  mer- 
chandise purchased  for  sale.  Merchandise  is  a  general  term  applied  to  goods 
bought  and  sold  in  the  trading  business,  such  as  groceries,  clothing,  shoes,  hats, 
hardware,  drugs,   miisical   instruments,  jewelry,   etc. 

Debit  the  Purchases  Account:  Credit  the  Purchases  Account: 

^  I.     For    the    cost    of    merchandise  *[  2.     For  the  cost  price  of  merchan- 

purchased,  and  the  transporta-  dise    returned    to    the    seller, 

tion  (freight,  express,  and  post-  and    allowances    granted    by 

age),     dray  age,     and     storage  him. 
cost  of  the  same. 

•;  3.  The  Balance  of  the  Purchases  Account  shows  the  net  cost  of  merchandise 
purchased  during  the  period  for  which  the  record  is  kept.  This  balance  will  not, 
as  a  rule,  represent  the  value  of  the  merchandise  owned  by  the  business  because 
the  merchandise  was  purchased  for  sale  and  a  part  of  it  has  probably  been  sold. 


SALES  ACCOUNT 

§  18.  The  Purpose  of  this  Account  is  to  show  the  net  returns  from  the 
sales  of  merchandise.  It  is  a  record  of  the  transactions  affecting  the  sales  of  those 
articles  purchased  for  sale,  the  cost  of  which  is  charged  to  the  Purchases  account. 

Debit  the  Sales  Account:  Credit  the  Sales  Account: 

^  I.     For  the  selling  price  of  merchan-  ^  2.     For  the  selling  price  of  merchan- 

dise returned  by  the  customer,  dise  sold, 

and  allowances  granted  to  him. 

^  3.  The  Balance  of  the  Sales  Account  shows  the  net  returns  from  the  sales 
of  merchandise  during  the  period  for  which  the  record  is  kept. 


RECORDING  TRANSACTIONS. 


II 


RECORDING  TRANSACTIONS  DIRECT  IN  THE  LEDGER 

§  19.  Transactions  May  Be  Recorded  direct  in  the  ledger  or  in  a  separate 
book  and  transferred  to  the  ledger,  as  explained  in  §13.  When  the  transactions 
are  recorded  direct  in  the  ledger,  the  date  of  each  transaction  and  the  amount 
are  recorded  on  the  debit  side  of  the  account  which  shows  the  value  received,  and 
the  date  and  the  amount,  on  the  credit  side  of  the  account  which  shows  the  value 
parted  with;    each  transaction  is  recorded  at  the  time  it  occurs. 

The  following  transactions  affecting  the  purchases  and  sales  of  merchandise 
for  cash,  performed   by  the  soda  fountain  department  of  the  Central  Drug  Co. 
during  the  week  beginning  July  2,  are  shown  recorded  direct  in  the  Cash,  Purchases, 
and  Sales  accounts  in  Illustration  No.  3. 
July  2.     Cash  sales  for  the  day  per  cash  register,  $39.40. 

3.     Bought  syrups  and  extracts,  $5.00;   Coca-Cola,  $12.75;   ice  cream,  $19.20. 
Cash  sales  for  the  day  per  cash  register,  $50.30. 
{Concluded  on  pa^e  12) 


/f7- 


3  ^\^a 

7    iS     »   o 


^ 


1 

i 

\ 

1      ; 

pv 

J 

J- 

'f  0 

A      /   : 

- 

r   -^   ft  <r 

. 

-s^c^ 

, 

il 

V 

11 

pf 

7 

y 

S'a 

dZu^ 

7^ 

J  a 

-^  0 

Jr^ 

■? 

0.  y 
cTa 

J  <? 

- 

— 

s~a 

\ 

' 

j~  0 

/ 

7  ' 

Illustration  No.  3,  A  Ledger  Containing  Three  Accounts. 

EXPLANATION.  B5'  comparing  the  transactions  with  the  record  in  the  ledger,  it  will  be 
observed  that  cash  is  the  value  received  in  the  first  transaction,  hence  the  date,  July  2,  and  the 
amount,  $39.40,  are  recorded  on  the  debit  side  of  the  Cash  account;  sales  (merchandise  sold)  is 
the  value  parted  with,  hence  the  date,  July  2,  and  the  amount,  $39.40,  are  recorded  on  the  credit 
side  of  the  Sales  account.  In  the  second  transaction,  purchases  (merchandise  bought)  is  the  value 
received,  hence  the  date,  July  3,  and  the  amount,  $36.95,  are  recorded  on  the  debit  side  of  the  Pur- 
chases account;  cash  is  the  value  parted  with,  hence  the  date,  July  3,  and  the  amount,  $36.95,  are 
recorded  on  the  credit  side  of  the  Cash  account.  The  other  transactions  are  recorded  in  the  same 
manner.  The  writing  and  large  figures  are  written  with  black  ink  and  the  small  figures  (totals) 
with  a  sharp  pencil. 


12 


TRIAL  BALANCE. 


5.  Returned  one  gallon  of  ice  cream  purchased  on  the  3d,  and  received  $2.50, 

the  cost  price  for  the  same. 
Bought  sandwiches,  $12.50;    flavoring,  $16.40;    ice  cream,  $20.00. 

6.  Cash  sales  for  the  day  per  cash  register,  $21.50. 

7.  Gave  James  Smith  $1.50  for  one-half  gallon  of  ice  cream  which  he  re- 

turned because  it  was  received  in  bad  condition. 
Cash  sales  for  the  day  per  cash  register,  $62.50. 

§  20.  A  Trial  Balance  is  a  list  of  the  open  accounts  in  the  ledger  with  the 
balance  or  the  total  debits  and  total  credits  set  opposite  the  name  of  each  account. 
The  Trial  Balance  is  usually  prepared  on  paper  with  two  money  columns  ruled  at 
the  right,  so  that  debit  totals  or  debit  balances  may  be  entered  in  one  column  and 
credit  totals  or  credit  balances  in  the  other.  If  the  total  debits  equal  the  total 
credits,  the  Trial  Balance  is  said  to  be  in  balance  and  proves  that  the  debits  and 
credits  recorded  in  the  accounts  are  equal. 

When  both  sides  of  the  accounts  are  used  in  the  Trial  Balance,  it  is  sometimes  referred  to  as  a 
"Trial  Balance  of  totals,"  and  when  the  balances  of  the  accounts  arc  used,  as  a  "Trial  Balance  of 
balances.''  A  complete  discussion  of  the  method  of  detecting  errors  when  the  Trial  Balance  does 
not  balance  will  be  given  later.  It  is  quite  evident  to  the  student  that,  if  the  ledger  is  not  in  bal- 
ance as  indicated  by  the  Trial  Balance,  it  is  necessary  to  check  the  transactions  recorded  in  the 
ledger  to  detect  the  errors. 


-^ 


C,^-^?-jJ25^^-s&-<^d^<L/<r'-s-«i-«9'    C__-«7r 


'^'7'-r>c^ 


J^/'?^-Z..^CZ^  ^^^z-<^«>j»^-c-<^    J/^^t^-^Y  /,  /jf?^ 


/\J~o 


^AA  vA/II      7'4.3\.:i-^ 


Illustration  No.  4,  A  Trial  Balance  of  Totals. 

EXPLANATION.  This  Trial  Balance  is  prepared  from  the  ledger  in  Illustration  No.  3. 
The  name  of  each  account  is  written  at  the  left  and  the  total  debits  and  total  credits  in  the  two 
money  columns  at  the  right.  The  name  of  each  account,  the  amount,  and  the  totals  of  the  columns 
are  written  in  black  ink;  if  the  Trial  Balance  is  footed  before  it  is  ruled,  the  totals  are  entered  in 
small  pencil  figures  in  the  same  manner  as  the  totals  in  Illustration  No.  3.  By  comparing  Illustration 
No.  4  with  Illustration  No.  3,  the  student  will  observe  that  it  is  necessary  to  add  the  accounts  in  the 
ledger  and  write  the  totals  in  small  pencil  figures  before  preparing  the  Trial  Balance. 


r  r 


r  3 


/•^i 

^-^i 


//>AfJ^^Z> 


-^^ 


y-^-o 


7-0 


Illustration  No.  5,  A  Trial  Balance  of  Balances. 

EXPLANATION.  It  is  customary,  when  taking  a  Trial  Balance  of  balances,  to  write  the 
balance  in  the  explanation  column  on  the  larger  side  of  the  account.  These  balances  .ire  not  shown 
in  Illustration  No.  3  because  they  are  not  necessary  in  taking  a  Trial  Balance  of  totals. 


RECORDING  TRANSACTIONS  IN  THE  LEDGER.  13 

Exercise  No.  1,  Recording  Transactions  Direct  in  the  Ledger. 

Record  on  ledger  paper*  (paper  with  the  same  ruHng  as  Illustration  No.  2)  the 
following  transactions  performed  during  the  month  of  January  by  J.  W.  McCor- 
mick,  a  dealer  in  musical  instruments.  It  will  require  fourteen  lines  for  recording 
the  transactions  in  the  Cash  account,  eight  lines  for  those  in  the  Purchases  account, 
and  twelve  lines  for  those  in  the  Sales  account.  If  one  sheet  of  ledger  paper  is  used 
for  the  three  accounts,  separate  them  by  red  lines  as  in  Illustration  No.  3,  being 
sure  to  allow  the  number  of  lines  necessary  for  recording  the  transactions,  as  in- 
dicated. 

Jan.     I.     Sold  for  cash  one  piano,  $450.00. 

2.     Bought  for  cash  one  hundred  Victrola  records,  $110.00. 
5.     Sold  for  cash  one  Victrola,  $225.00;   records,  $10.50. 

Enter  as  one  amount  in  the  same  manner  as  the  transaction  of  July  3  recorded  in 
Illustration  No.  3. 
7.     Sold  for  cash  one  piano,  $350.00. 
10.     Sold  for  cash  one  player-piano,  $500.00;   rolls,  $22.50. 
12.     Bought  for  cash  three  Victrolas,  $320.00;  paid  freight  on  the  same,  $52.50. 
14.     Sold  for  cash  one  Victrola,  $200.00;   records,  $42.50. 

17.  Gave  J.  O.  Smith  $1.50  for  a  damaged  record  which  he  purchased  on  the 

14th  and  returned. 

18.  Sold  for  cash  one  Victrola,  $50.00;   records,  $6.50. 

20.     Bought  for  cash  one  piano,  $225.00;    paid  freight  and  drayage  on  the 

same,  $42.65. 
23.     Sent  the  damaged  record  returned  to  us  on  the  17th  to  the  distributing 

agent  of  the  records  and  received  90c  for  the  same. 
27.     Sold  for  cash  one  Victrola,  $75.00;   records,  $10.50. 

Bought  for  cash  one  piano,  $300.00;    paid  freight  on  the  same,  $48.65. 

30.  Received  $3.50  from  the  railroad  company  to  pay  for  overcharge  on 

freight  paid  on  the  20th. 

31.  Sold  for  cash  one  piano,  $350.00. 

When  these  transactions  have  been  recorded  in  the  three  accounts,  add  the 
debit  side  and  the  credit  side  of  each  account,  enter  the  totals  in  small  pencil  figures 
as  in  Illustration  No.  2,  and  prove  the  equality  of  the  debits  and  credits  by  a  Trial 
Balance  of  totals  as  in  Illustration  No.  4. 

Exercise  No.  2,  Recording  Transactions  Direct  in  the  Ledger. 

Record  on  ledger  paper*  the  following  transactions  performed  during  the  week 
beginning  May  28  by  Charles  Smith,  a  butcher.     Allow  space  for  the  accounts  as 
follows:    Cash,  ten  lines;    Purchases,  eight  lines;   Sales,  nine  lines. 
May  28.     Cash  sales  for  the  day  per  cash  register,  $42.85. 

29.  Bought  meat  for  cash,  $22.50. 

Cash  sales  for  the  day  per  cash  register,  $35.60. 

30.  Paid  the  express  company  $20.00,  $18.75  of  which  was  for  a  C.  O.  D. 

shipment  of  lard  and  $1.25  for  express  charges  on  the  same. 
Cash  sales  for  the  day  per  cash  register,  $45.25. 

31.  Gave  Mrs.  R.  K.  Polk  $1.10  cash  for  a  steak  which  she  returned  because 

it  was  not  satisfactory. 
June   I.     Bought  meat  for  cash,  $57.50. 

Cash  sales  for  the  day  per  cash  register,  $49.90. 

{Concluded  on  page  14) 

*NOTE.  The  exercises  in  the  text  are  not  to  be  recorded  in  the  books  of  account  provided 
for  the  practice  set.  Unless  special  blanks,  marked  "For  Exercises  in  the  Text,"  are  provided,  the 
student  should  use  loose  sheets  of  ruled  paper.  Unless  otherwise  instructed,  the  student  will  present 
to  the  instructor  for  approval  each  exercise  as  it  is  completed. 


14  ROOKS  OF  ORIGINAL  ENTRY 

Exercise  No.  2 — (Continued  from  page  ij.) 

June  2.     Received  I3.50  from  the  Central  Provision  Co.  for  lard  which  we  returned 
as  per  agreement. 
Bought  meat  for  cash,  $36.40. 
Cash  sales  for  the  day  per  cash  register,  $72.19. 
When  these  transactions  have  been  recorded  in  the  three  accounts,  add  the 
debit  side  and  the  credit  side  of  each  account,  enter  the  totals  in  small  pencil  figures, 
and  prove  the  equality  of  the  debits  and  credits  by  a  Trial  Balance  of  totals  as  in 
Illustration  No.  4. 

Exercise  No.  3,  Recording  Transactions  Direct  in  the  Ledger. 

Record  on  ledger  paper  the  following  transactions  performed  during  the  week 
beginning  September  15  by  G.  S.  Johnson,  who  conducts  the  Central  Cafeteria. 
Allow  space  for  the  accounts  as  follows:    Cash,  eleven  lines;   Purchases,  nine  lines; 
Sales,  ten  lines. 

Sept.   15.     Paid  cash  for  meat,  $25.50;   bread,  $4.75. 
Received  for  cash  sales,  $37.55. 

16.  Paid  cash  for  vegetables,  $12.80. 
Received  for  cash  sales,  $32.65. 

17.  Paid  cash  for  canned  goods,  $13.75;    meat,  $15.00;   bread,  $5.50. 
Received  for  cash  sales,  $29.90. 

18.  Received  cash,  $2.50,  for  canned  goods  returned  by  us  as  per  agreement. 
Received  for  cash  sales,  $31.55. 

19.  Paid  cash  for  meat,  $9.75;   bread,  $3.40. 
Received  for  cash  sales,  $27.90. 

20.  Paid  cash  for  vegetables,  $13.50;   bread,  $5.60;   butter,  $7.55. 
Received  for  cash  sales,  $44.59. 

When  these  transactions  have  been  recorded  in  the  three  accounts,  foot  the 
debit  and  credit  side  of  each  account  which  has  more  than  one  amount  recorded 
on  it;  enter  the  balance  with  small  pencil  figures  in  the  explanation  column  on 
the  larger  side,  and  take  a  Trial  Balance  of  balances  as  in  Illustration  No. ''5. 

§  2L  A  Book  of  Original  Entry.  As  explained  in  §  13,  transactions  ma\' 
be  recorded  direct  in  the  ledger  or  in  a  separate  book  of  account  and  transferred  to 
the  ledger.  A  book  of  original  entry  is  a  book  of  account  used  for  recording  trans- 
actions separate  from  the  ledger.  When  transactions  are  recorded  separate  from 
the  ledger,  the  facts  shown  by  this  record  must  be  transferred  to  the  ledger  because 
the  information  required  by  the  owner  is  obtained  from  the  accounts  in  the  ledger. 
There  are  many  kinds  of  books  of  original  entry,  each  of  which  will  be  explained  as 
it  is  needed  in  connection  with  recording  the  transactions  in  the  exercises.  At 
present  the  journal  is  the  only  book  of  original  entry  used  for  recording  transactions. 

§  22.  The  Journal  is  a  book  of  original  entry  (bound  or  loose-leaf)  ruled  to 
provide  for  the  recording  of  business  transactions.  If  it  is  the  only  book  of  original 
entry,  all  the  transactions  are  recorded  in  it;  if  other  books  of  original  entry  are 
used,  it  contains  only  those  transactions  which  are  not  recorded  in  the  other  books. 
The  ruling  in  the  journal  provides  space  for  the  date  of  the  transaction,  the  name 
of  the  account  debited  and  the  amount,  the  name  of  the  account  credited  and  the 
amount,  and  an  explanation  of  the  transaction.  Illustration  No.  6  shows  one  form 
of  ruling  for  the  journal;   others  will  be  explained  and  illustrated  later. 

^  I.  Journalizing  is  indicating  the  names  of  the  accounts  debited  and  credited 
in  a  transaction  before  recording  it  in  a  book  of  original  entry;  if  written,  the  names 
of  the  accounts  debited  and  credited  and  the  amounts  are  arranged  in  journal  form 
as  in  Illustration  No.  7. 


RECORDING  TRANSACTIONS  IX  THE  JOURNAL. 


15 


Illustration  No.  6/^Ruling  for  a  Page  in  the  Journal. 
EXPLANATION.  The  date  of  the  first  transaction  recorded  on  the  page  is  written  on  the 
blue  line  at  the  top,  and  the  date  of  succeeding  transactions  on  the  blue  Hne  immediately  below  the 
last  transaction  recorded.  The  name  of  the  account  debited  is  written  at  the  left,  and  the  amount 
in  the  first  money  column  on  the  same  line  with  it;  the  name  of  the  account  credited  is  written  on 
the  line  below,  one-half  inch  to  the  right  of  the  name  of  the  account  debited,  and  the  amount  in 
the  second  money  column  on  the  same  line  with  it.  The  explanation  is  begun  on  the  line  below  the 
name  of  the  account  credited  and  may  occupy  one  or  more  lines,  depending  on  the  nature  of  the 
transaction.  The  space  between  the  two  red  lines  at  the  left  is  for  the  page  of  the  account  in  the 
ledger.  The  name  of  the  account  credited  is  written  to  the  right  of  the  name  of  the  account  debited 
so  as  to  distinguish  between  the  two  accounts  affected  by  the  transaction. 

RECORDING  TRANSACTIONS  IN  THE  JOURNAL 

§  23.  Transactions  Are  Recorded  in  the  Journal  in  the  order  in  which 
they  occur.  A  complete  record  of  a  transaction  in  the  journal  must  show  the  date 
of  the  transaction,  the  name  of  the  account  debited  and  the  amount,  the  name  of 
the  account  credited  and  the  amount,  and  the  explanation.  This  explanation  is 
for  the  information  of  the  bookkeeper  or  any  person  who  may  have  occasion  to 
examine  the  record. 

The  following  transactions  affecting  the  purchases  and  sales  of  merchandise 
for  cash,  performed  by  the  soda  fountain  department  of  the  Central  Drug  Co.  during 
the  week  beginning  July  2,  are  shown  recorded  in  the  journal  in  Illustration  No.  7. 
These  transactions  are  the  same  as  those  beginning  on  page  9. 
July  2.     Cash  sales  for  the  day  per  cash  register,  $39.40. 

3.     Bought  syrups  and  extracts,  $5.00;  Coca-Cola,  $12.75;  ice  cream,  $19.20. 
Cash  sales  for  the  day  per  cash  register,  $50.30. 

5.  Returned  one  gallon  of  ice  cream  purchased  on  the  3d.  and  received  $2.00, 

the  cost  price,  for  the  same. 
Bought  sandwiches,  $12.50;    flavoring,  $16.40;    ice  cream,  $20.00. 

6.  Cash  sales  for  the  day  per  cash  regis,ter,  $21.50. 

7.  Gave  James  Smith  $1.50  for  one-half  gallon  of  ice  cream  which  he  re- 

turned because  it  was  received  in  bad  condition. 
Cash  sales  for  the  day  per  cash  register,  $62.50. 


i6 


THE  JOURNAL. 


r  / 


-J^"^^  ^'''f^ 


3 


'  i:>^-^<z-<^^z^^ 


i,  (_^tf£-c:^<n-^ 


7 


L-iSSL-<^-<*C-',<^<X-.^k^  -^2£^»r7^.-^^l^  l!^^X^^ 


-^f 

^^ 

^.-^ 

/^- 

vT-^ 

1 

;^,y-> 


-^Zl 


^  <^Wa 


S   o     .'^  ^ 


^a  J  a 


>,urtf' 


_^-^ 


lr 


t      ' 

1           ' 

t        ■ 

^z: 


>/ 


^^ 


^i? 


^> 


i^*^; 


/    c^T",^ 


C  ■>^^''eP 


Illustration  No.  7,  A  Journal  Page  with  Transactions  Recorded  on  It. 

.    EXPLANATION.     A  comparison  of  this  illustration  with  the  transactions  on  page  15  and 
with  the  explanation  of  Illustration  No.  6  is  all  the  explanation  that  is  needed  for  this  illustration. 


POSTING  FROM  THE  JOURNAL. 


17 


§  24.  Posting  from  the  Journal  is  transferring  the  amounts  from  the 
journal  to  the  accounts  in  the  ledger.  Each  amount  in  the  debit  column  is  posted 
to  the  debit  side  of  the  account  written  on  the  same  line  with  it.  Each  amount 
in  the  credit  column  is  posted  to  the  credit  side  of  the  account  written  on  the  same 
line  with  it.  The  page  in  the  journal  and  the  letter  "J"  are  entered  in  the  folio 
column  in  the  ledger  for  reference;  the  page  of  the  account  in  the  ledger  is  written 
in  the  folio  column  in  the  journal  to  indicate  the  posting.  These  amounts  are 
posted  to  the  ledger  in  the  same  order  as  they  are  recorded  in  the  journal.  The 
purpose  of  posting  is  to  provide  a  record  of  the  transactions  in  account  form. 

The  transactions  recorded  in  Illustration  No.  7,  when  posted  to  the  ledger 
accounts,  will  appear  as  in  Illustration  No.  8,  and  a  Trial  Balance  from  these  ledger 
accounts  will  appear  as  in  Illustration  No.  4  or  No.  5. 

: L_-«z..<^=^<!f: 


Illustration  No.  8,  A  Ledger  with  Three  Accounts  Resulting  from  Posting. 

EXPLANATION.  By  comparing  this  illustration  with  Illustration  No.  7,  it  will  be  observed 
that  each  amount  written  in  the  first  column  in  the  journal  is  transferred  to  the  debit  side  of  the 
account  written  on  the  same  line  with  it,  and  each  amount  written  in  the  second  column  in  the  journal 
is  transferred  to  the  credit  side  of  the  account  written  on  the  same  line  with  it.  The  posting  is 
indicated  by  writing  the  journal  page  "i"  in  the  folio  column  (see  column  4,  Illustration  No.  i)  in 
the  ledger,  and  by  writing  the  ledger  page  "i"  in  the  folio  column  of  the  journal  (see  explanation  of 
Illustration  No.  6).  Unless  the  posting  is  indicated  by  these  numbers  as  each  transaction  is  posted 
the  bookkeeper  might  post  the  same  amount  again,  especially  if  there  should  be  an  interruption  in 
his  work  while  he  was  posting. 

A  comparison  of  Illustration  No.  8  with  Illustration  No.  3  shows  that  the  facts  are  the  same 
except  that  the  folio  column  is  used  in  the  former  because  the  amounts  are  transferred  from  a  book 
of  original  entry,  while  it  is  not  used  in  the  latter  because  the  transactions  were  recorded  direct  in 
the  ledger,  hence  no  references  were  needed 


1 8  RECORDING  TRANSACTIONS  IN  THE  JOURNAL. 

Exercise  No.  4,  Recording  Transactions  in  the  Journal  and  Posting. 

Record  on  journal  paper*  (paper  with  the  same  ruUng  as  Illustration  No.  6) 
the  following  transactions  performed  during  the  month  of  March  by  Robert  Smith, 
a  dealer  in  used  automobiles: 

March     i.     Sold  A.  L.  Lott  a  used  Chandler  for  $840.00  cash. 

3.     Bought  a  used  Ford  from  W.  H.  Roland  for  $250.00  cash. 
8.     Sold  W.  W.  Jones  a  used  1920  Franklin  for  $925.00  cash. 
15.     Bought  a  used  Packard  from  Robert  MacFarland  for  $980.00  cash. 
19.     Sold  Davis  Bros,  the  used  Packard  purchased  on  the  15th,  for  $1,200.00 

cash. 
25.     Bought  a  used  Hudson  from  David  Browning  at  Danville  for  $950.00 

cash;    paid  Charlie  Smith  $25.00  for  delivering  this  car. 
31.     Sold   B.   M.   Morris   the   used   Hudson    purchased   on   the   25th,    for 
$1,250.00  cash. 

When  the  above  transactions  have  been  recorded  in  the  journal  as  instructed, 
open  accounts  on  a  sheet  of  ledger  paper  with  Cash  (8),  Purchases  (7),  and  Sales 
(8),  allowing  for  each  account  the  number  of  lines  indicated  by  the  number  given 
in  parenthesis  after  the  name  of  the  account;  post  the  transactions,  and  prove  the 
posting  by  a  Trial  Balance  of  totals.     Use  loose  paper  unless  otherwise  instructed. 

Exercise  No.  5,  Recording  Transactions  in  the  Journal  and  Posting. 

Record  on  journal  paper*  the  following  cash  transactions  performed  by  the 
H.  F.  Ritter  Electric  Co.  during  the  month  of  August: 

Aug.     I.     Sold  M.  N.  Stewart  a  No.  9  electric  washer,  $135.50. 
2.     Sold  A.  L.  Graham  three  Solvay  electric  fans,  $99.75. 
5.     Bought  three  electric  lamps  from  the  General  Electric  Co.,  $85.70. 
9.     Received  $275.00  from  the  Dowell  Construction  Co.  in.  payment  for 

one  No.  10  electric  washer. 
12.     Bought  two  electric  washers  from  the  General  Electric  Co.,  $325.00. 
16.     Sold  Mrs.  J.  M.  Taylor  one  electric  iron,  $13.50. 
18.     Sold  Mrs.  A.  L.  Day  one  electric  lamp,  $42.50. 
21.     Gave  H.  L.  Jones  $5.50  for  an  electric  iron  which  he  purchased  for  cash 

and  returned  per  agreement. 
25.     Sold  Dr.  C.  C.  Doyle  one  No.  5  electric  pad,  $22.50;   one  No.  6  Violet 

Ray  machine,  $35.00. 
28.     Received  $12.50  from  the  General  Electric  Co.  for  a  lamp  w-hich  we 
purchased  from  them  on  the  5th,  but  returned  because  it  was  not  the 
kind  ordered. 

When  the  above  transactions  have  been  recorded  in  the  journal  as  instructed, 
open  accounts  on  a  sheet  of  ledger  paper  with  Cash  (11),  Purchases  (6),  and  Sales 
(10),  allowing  for  each  account  the  number  of  lines  indicated;  post  the  transac- 
tions, and  prove  the  posting  by  a  Trial  Balance  of  totals. 

Exercise  No.  6,  Recording  Transactions  in  the  Journal  and  Posting. 

Record   on   journal   paper*   the  following  transactions  performed  during  the 
month  of  March  by  Martin  R.  Daley,  a  retail  furniture  dealer: 
March     i.     Sold   for  cash  one  bedroom  suite,  $175.00;    one  dining  room  suite, 
$196.50. 

(Concluded  on  page  ig.) 

*See  note  at  the  bottom  of  page  13. 


QUESTIONS  ON  RECORDING  TRANSACTIONS.  19 

(Exercise  No.  6 — Continued  from  page  18.) 

5.     Paid  cash  for  furniture  purchased,  $209.60. 
10.     Paid  $18.75  cash,  freight  on  furniture  purchased. 
12.     Received  cash  for  six  rugs  sold,  $205.75. 

Paid  cash  for  furniture  purchased,  $172.60. 
15.     Gave  a  customer  cash,  $5.50,  for  a  chair  returned  as  per  agreement. 
18.     Paid  cash  for  furniture  purchased,  $82.50. 
21.     Received  $14.75  cash  for  three  small  rugs  returned  by  us  to  the  seller 

as  per  agreement. 
25.     Sold  for  cash  one  refrigerator,  $55.00;    one  gas  range,  $47.50;    one 

kitchen  cabinet,  $65.00. 
30.     Paid   the   American    Railway   Express   Co.   cash,   $2.50,    for   express 

charges  on  furniture  purchased. 

When  the  above  transactions  have  been  recorded  in  the  journal  as  instructed, 
open  accounts  on  a  sheet  of  ledger  paper  with  Cash  (10),  Purchases  (9),  and  Sales 
(7),  allowing  for  each  account  the  number  of  lines  indicated;  post  the  transactions 
and  prove  the  posting  by  a  Trial  Balance  of  balances. 


QUESTIONS 

1.  What  is  the  purpose  of  bookkeeping  and  how  is  it  accomplished? 

2.  In  what  order  are  the  transactions  recorded? 

3.  State  the  two  methods  of  recording  transactions. 

4.  How  would  you  record  a  cash  sale  in  the  journal?     Direct  in  the  ledger? 

5.  Which  is  preferable,  a  bound  book  or  a  loose-leaf  book? 

6.  If  a  merchant  wishes  to  know  the  total  sales  of  merchandise  for  any  given 

number  of  months,  from  which  book  of  account  would  he  obtain  the 
information?   from  what  account? 

7.  If  a  drug  store  has  five  departments,  would  it  be  necessary  to  maintain  a  Cash 

account  for  each  department?    Give  reasons  for  your  answer. 

8.  Would  it  be  necessary  to  keep  a  separate  record  of  the  sales  made  by  each  of 

the  five  departments  mentioned  in  Question  No.  7? 

9.  If  you  w^ere  keeping  books  for  a  local  merchant  and,  when  you  proved  cash  at 

the  close  of  January  10,  you  found  that  you  had  $2.00  more  cash  than  the 
amount  shown  bv  the  Cash  account,  what  entry  would  you  make  for  the 
$2.00? 

10.  Why  will  the  Sales  account  always  show  a  credit  balance? 

11.  Why  will  the  Purchases  account  always  show  a  debit  balance? 

12.  Why  will  the  Cash  account  always  show  a  debit  balance? 

13.  Why  does  the  Trial  Balance  prove  that  the  total  debits  equal  the  total  credits 

in  the  ledger? 

14.  If  $10.00  cash  is  received  for  a  sale  of  merchandise  and  the  amount  is  erron- 

neously  entered  on  the  credit  side  of  the  Purchases  account  instead  of  the 
Sales  account,  how  would  it  alTect  the  Trial  Balance? 

15.  How  would  the  error  mentioned  in  Question  14  affect  the  balance  of  the  Pur- 

chases account?    the  Sales  account? 


20  QUESTIONS  ON  RECORDING  TRANSACTIONS. 

1 6.  If  the  debits  and  credits  on  the  Trial  Balance  are  not  equal,  how  does  the  book- 

keeper, who  has  recorded  the  transactions  separate  from  the  ledger,  ascertain 
the  error? 

17.  Why  is  it  advisable  to  give  an  explanation  of  each  entry  in  the  journal? 

18.  If  $10.10  cash  is  received  for  merchandise  sold  and  recorded  in  the  journal  as 

Cash,  Dr.,  $10.00,  and  Sales,  Cr.,  $10.10,  what  effect  will  this  have  on  the 
Trial  Balance  if  the  entry  is  posted  as  recorded? 

19.  What  does  a  telephone  company  sell? 

20.  Would  these  sales  be  recorded  in  a  Sales  account? 

21.  W^ould  the  bookkeeper  for  a  city  government  ha\e  a  Sales  account  in  his 

ledger? 

22.  Would  the  farmer  who  keeps  a  record  of  the  transactions  he  performs  ha\e  a 

Sales  account  in  his  ledger? 

23.  If  a  merchant  discontinues  business  and  sells  all  the  merchandise  which  he 

owns,  what  will  the  balance  of  the  Sales  account  show? 

24.  Under  the  conditions  mentioned  in  Question  No.  23,  what  would  the  balance 

of  the  Purchases  account  show? 

25.  If  a  grocer  buys  an  automobile  truck  to  be  used  in  delivering  merchandise, 

would  the  value  of  this  truck  be  debited  to  the  Purchases  account?     Give 
reasons  for  vour  answer. 


Chapter  III 

RECORDING  TRANSACTIONS— Continued 

§  25.     Purchases  and   Sales  of  Merchandise  on  Account.     It   is  not 

always  possible  for  the  owner  of  a  business  to  pay  cash  at  the  time  merchandise 
is  purchased,  or  to  demand  cash  at  the  time*  merchandise  is  sold.  When  the  owner 
of  the  business  does  not  pay  cash  for  merchandise  at  the  time  purchased,  the 
seller  extends  credit  to  the  business;  that  is,  he  accepts  the  owner's  promise  to 
pay  at  a  future  date  as  the  value  received  in  the  transaction.  The  owner  of  the 
business  to  which  credit  is  extended  regards  his  promise  to  pay  at  a  future  date 
for  merchandise  purchased  as  a  value  parted  with  in  a  transaction  in  which  mer- 
chandise is  purchased  on  account.  When  the  liability  is  paid,  the  cancellation 
of  the  obligation  is  the  value  received. 

When  the  owner  of  the  business  does  not  receive  cash  for  merchandise  at  the 
time  it  is  sold,  he  extends  credit  to  the  customer;  that  is,  he  accepts  the  customer's 
promise  to  pay  at  a  future  date  as  the  value  received  in  the  transaction.  When 
the  customer  pays  the  amount  he  owes  the  business,  the  cancellation  of  his  debt  is 
regarded  as  the  value  parted  with. 

The  one  who  extends  credit  to  a  business  is  referred  to  as  a  creditor,  and  the 
one  to  whom  the  business  extends  credit,  as  a  debtor;  the  term  "customer"  applies 
to  one  to  whom  the  business  sells,  either  for  cash  or  on  account. 

If  no  specific  time  of  payment  is  mentioned,  it  is  understood  that  collection  is 
to  be  made  on  the  first  of  the  following  month;  if  a  specific  time  is  mentioned,  then 
payment  is  due  on  that  date. 

Mr.  Jones,  who  operates  the  drug  business  at  405  Main  Street,  wishes  to  purchase  a  quantity 
of  drugs  from  a  wholesale  house,  but  does  not  have  sufficient  cash  with  which  to  pay  for  them.  By 
agreement,  he  is  allowed  thirty  days  in  which  to  pay  for  the  drugs.  The  wholesale  drug  house  which 
extends  this  credit  becomes  one  of  his  creditors,  and  he  one  of  its  debtors. 

James  Smith,  an  employee  of  a  local  bank,  receives  his  salary  monthly.  He  is  in  need  of 
drugs,  but  has  not  sufficient  money  to  pay  for  them.  Mr.  Jones  agrees  to  sell  him  the  drugs  and 
allow  him.  to  pay  for  them  at  the  time  he  receives  his  salary.  Mr.  Smith  becomes  one  of  the  debtors 
of  the  business,  and  Mr.  Jones  one  of  Mr.  Smith's  creditors. 

ACCOUNTS  WITH  PERSONS 

§  26.  Accounts  with  Persons  are  those  required  when  credit  is  extended 
to  the  business  through  the  purchase  of  merchandise,  or  when  the  business  extends 
credit  to  its  customers  through  the  sale  of  merchandise.  Accounts  with  persons 
are  divided  into  two  classes:  one  (accounts  with  customers)  shows  the  result  of 
transactions  with  the  persons  to  whom  the  business  sells  merchandise  or  other 
assets  on  account,  usually  referred  to  as  "accounts  receivable;"  and  the  other 
(accounts  with  creditors)  shows  the  result  of  transactions  with  those  from  whom 
merchandise  or  other  assets  are  purchased  on  account,  usually  referred  to  as  "ac- 
counts payable." 

ACCOUNTS  RECEIVABLE 

§  27.  The  Purpose  of  an  Account  with  a  Customer  is  to  show  a  record 
of  the  transactions  in  which  the  business  sells  merchandise  or  some  other  asset 
to  him  on  account.  When  a  customer  pays  cash  for  merchandise,  it  is  not  nec- 
essary to  record  the  transactions  in  an  account  with  him;    but  when  he  buys  and 

21 


22  ACCOUNTS  RECEIVABLE  AND  PAYABLE. 

does  not  pay  cash,  it  is  necessary  to  record  the  date  and  amount  of  the  sale  in  an 
account  with  him  so  that  the  owner  may  know  the  amount  the  customer  owes 
him  when  settlement  is  desired.  A  separate  account  is  kept  with  each  customer 
because  the  owner  of  the  business  should  know  the  amount  due  from  each  customer 
to  whom  he  sells  on  account  as  well  as  the  total  amount  due  from  all  customers. 

Debit  the  Account  of  •  Credit  the  Account  of 

Each  Customer:  Each  Customer: 

^  I.     For  the  selling  price  of  merchan-  ^  2.     For  the  cash  or  other  assets  re- 

dise  or  other  assets  sold  to  him  ceived  from  him  to  apply  on  ae- 

on account,  and  for  transpor-  count,  and  for  the  amount  of 

tation  if  the   terms  of  sale  do  any    allowance    or   deduction 

not    include    delivery.  granted  to  him.     Partial  Pay- 

ments   are    indicated    as    ex- 
plained in  T[  5. 

•[  3.  The  Balance  of  an  Account  Receivable  shows  the  amount  the  customer 
owes  the  business.  It  is  one  of  the  assets  of  the  business.  The  debit  side  will  be 
the  larger  unless  the  customer  should  pay  for  more  than  he  has  purchased.  When 
the  two  sides  are  equal,  his  account  is  said  to  be  in  balance;  this  indicates  that  he 
has  paid  the  business  for  all  the  assets  purchased  on  account. 

^  4.  Riding  an  Account  Receivable.  When  the  account  with  a  customer  is 
in  balance,  it  should  be  ruled  with  a  red  line  as  in  the  account  with  Walter  Rogers 
in  Illustration  No.  9.  If  there  are  a  number  of  debits  or  credits,  the  two  sides  should 
be  footed  to  prove  that  they  are  equal  before  ruling.  When  possible,  the  red  line 
should  be  ruled  on  the  same  bllie  line  on  each  side  of  the  account  so  that  the  cus- 
tomer's obligation  to  the  business  and  his  settlement  of  it  will  be  between  parallel 
lines.  The  use  of  red  ink  for  ruling  is  not  arbitrary  but  is  it  customary  for  book- 
keepers to  use  it,  hence  its  use  in  the  illustrations. 

II  5.  Partial  Payments.  A  debtor  has  the  right,  by  law,  to  indicate  on  what 
item  his  payment  shall  be  applied.  Thus  if  he  owes  several  amounts  and  wishes 
the  payment  to  be  applied  to  any  one  particular  amount,  and  indicates  this,  the 
credit  must  be  applied  on  that  amount.  In  cases  of  this  kind  the  bookkeeper 
should  indicate  the  amount  on  which  the  credit  is  applied  by  placing  a  letter  at 
the  left  of  the  amount  of  the  item  on  the  debit  side,  and  placing  the  same  letter  to 
the  left  of  each  pa^anent  on  the  credit  side.  It  is  best  to  begin  with  "a"  and  continue 
with  as  many  letters  as  may  be  required  for  payments  on  different  charges.  The 
letters  are  not  necessary  when  an  item  is  paid  in  full  by  one  payment,  and  the  ac- 
count is  ruled.  If  the  payments  are  indicated  by  the  letter  as  explained  the  book- 
keeper can  ascertain  the  amount  due  for  any  one  sale  without  referring  to  a  book 
of  original  entry. 


ACCOUNTS  PAYABLE 

§  28.  The  Purpose  of  an  Account  with  a  Creditor  is  to  show  a  record  of 
the  transactions  in  which  the  business  buys  merchandise  or  some  other  asset  from 
him  on  account.  When  merchandise  is  purchased  for  cash,  no  account  with  the  one 
from  whom  it  is  purchased  is  necessary  because  the  transaction  is  completed;  but 
when  the  business  buys  on  account,  it  is  necessary  to  keep  a  record  of  such  trans- 
actions in  order  that  the  owner  may  know  the  amount  he  owes  at  the  time  settle- 
ment is  made.    A  separate  account  is  kept  with  each  creditor  because  the  owner  of 


RECORDING  TRANSACTIONS  IN  THE  LEDGER. 


23 


the  business  should  know  the  amount  lie  owes  each  creditor  as  well  as  the  total 
amount  due  all  creditors. 


Credit  the  Account  of 
Each  Creditor: 

^[  2.  For  the  cost  of  merchandise  or 
other  assets  purchased  from 
him  on  account,  and  for  trans- 
portation if  the  terms  of  pur- 
chase do  not  include  delivery. 


Debit  the  Account  of 
Each  Creditor: 
■^  I.  For  cash  or  other  assets  of  the 
business  given  him  to  apply 
on  account,  and  for  any  al- 
lowance or  deduction  granted 
to  the  business  by  him.  Partial 
payments  are  indicated  as 
explained  in  §  27,  ^  5. 

^  3.  The  Balance  of  an  Account  Payable  shows  the  amount  the  business 
owes  the  creditor.  The  credit  side  will  be  the  larger  unless  the  business  should  pay 
a  creditor  more  than  it  owes  him.  The  balance  due  a  creditor  is  one  of  the  verbal 
obligations  of  the  business,  hence  a  liability. 

^  4.  Ruling  an  Account  Payable.  The  account  wnth  a  creditor  is  ruled  in 
the  same  manner  as  an  account  with  a  customer,  as  described  in  §  27,  ^  4. 

^  5.  Partial  Payments  should  be  indicated  by  letter  as  explained  in  §  27, 
If  5.  This  enables  the  bookkeeper  to  ascertain  the  balance  due  on  any  one  purchase 
without  referring  to  a  book  of  original  entry. 


RECORDING  TRANSACTIONS  DIRECT  IN  THE  LEDGER 

§  29.  Transactions  with  customers  0*1  account,  and  with  creditors  may  be 
recorded  direct  in  the  ledger  in  the  same  manner  as  cash  transactions.  When 
credit  is  extended  to  a  customer  of  the  business,  his  promise  to  pay  the  amount  of 
the  sale  is  recorded  on  the  debit  side  of  his  account  as  the  value  received,  and  the 
value  of  the  merchandise  sold,  on  the  credit  side  of  the  Sales  account  in  the  same 
manner  as  a  cash  sale.  When  credit  is  extended  to  the  business,  the  cost  of  the 
merchandise  purchased  is  recorded  on  the  debit  side  of  the  Purchases  account  in 
the  same  manner  as  a  cash  purchase,  and  the  same  amount  is  recorded  on  the  credit 
side  of  the  creditor's  account  because  the  promise  of  the  owner  of  the  business  to 
pay  for  the  merchandise  bought  is  regarded  as  the  value  parted  with.  The  account 
with  a  customer  remains  on  the  ledger  as  an  asset,  and  that  with  a  creditor  as  a 
liability,  until  settlement  is  made,  either  with  cash  or  some  other  asset. 

The  following  transactions  affecting  the  purchases  and  sales  of  merchandise 
for  cash  and  on  account,  performed  by  J.  H.  Henderson,  a  retail  furniture  dealer, 
during  the  month  of  November,  are  shown  recorded  direct  in  accounts  with  Cash, 
Purchases,  Sales,  customers,  and  creditors  in  Illustration  No.  9  and  a  Trial  Balance 
of  totals  made  from  the  accounts,  in  Illustration  No.  10. 


Nov. 


I. 


6 
12 

14 
20 

25- 
26. 
29. 


Purchased    furniture    from    the    Consolidated    Furniture    Co.,    Grand 

Rapids,  on  sixty  days'  time,  $215.75. 
Sold  C.  H.  Powers,  Arlington,  on  account,  one  bedroom  suite,  $125.00. 
Sold  Walter  Rogers,  City,  on  account,  one  hatrack,  $22.50. 
Received  cash  for  furniture  sold  today,  $625.50. 
Paid  the  Consolidated  Furniture  Co.  $100.00  on  account. 
Received  $22.50  from  Walter  Rogers  in  payment  for  the  hatrack  sold 

him  on  the  6th. 
Received  $25.00  from  C.  H.  Powers  to  apply  on  account. 
Sold  C.  H.  Powers  on  account  three  leather  rockers  at  $25.50  each. 
C.  H.  Powers  returned  one  of  the  rockers  and  was  allowed  credit  for 

$25-50. 


24  RECORDING  TRANSACTIONS  IN  THE  LEDGER. 


^ 


■?j  >  Jya  jl  ^a-^z/-      5u.^j 


-4t- 


JM^-'^-^ 


L.^^t:'-^;'2,.J.'-G'-7:>C'C^!!^^  O*^ 


Illustration  No.  9,  A  Ledger  with  Six  Accounts. 

EXPLANATION.  This  illustration  is  in  the  same  form  as  Illustration  No.  3,  with  the 
exception  of  three  additional  accounts,  two  with  customers  and  one  with  a  creditor.  A  comparison 
of  the  transactions  with  the  record  will  show  that  the  value  received  in  each  is  recorded  on  the  debit 
side,  and  the  value  parted  with  on  the  credit  side.  The  "60  days"  in  the  explanation  column  of 
the  account  with  the  Consolidated  Furniture  Co.  refers  to  the  time  when  payment  is  to  be  made. 
Since  the  purchase  is  on  November  i,  payment  will  be  expected  on  December  31.  When  no  specific 
time  of  settlement  is  mentioned,  the  purchase  or  sale  is  sometimes  referred  to  as  "on  account," 
and  settlement  is  usually  required  on  the  first  of  the  month  following  the  purchase  or  sale. 


RECORDING  TRANSACTIONS  IN  THE  LEDGER. 


25 


*0 


.Ja /<?■'> 


Illustration  No.  10,  A  Trial  Balance  of  Totals. 


EXPLANATION.  This  Trial  Balance  which  is  prepared  from  the  ledger  in  Illustration  No. 
9  is  the  same  form  as  Illustration  No.  4  with  the  addition  of  two  personal  accounts.  By  com- 
paring this  illustration  with  Illustration  No.  9,  it  will  be  observed  that  the  account  with  Walter 
Rogers  does  not  appear  on  the  Trial  Balance.  The  reason  for  this  is  because  the  amounts  recorded 
on  the  debit  and  credit  sides  are  equal.  This  emphasizes  the  fact  that  only  the  open  accounts  in 
the  ledger  appear  on  the  Trial  Balance. 

Exercise  No.  7,  Recording  Transactions  Direct  in  the  Ledger. 

Record  on  ledger  paper*  the  following  transactions  performed  during  the  month 
of  October  by  J.  J.  Hammond,  a  retail  shoe  dealer.  Allow  space  for  the  accounts  as 
follows:  Cash,  ten  lines;  Purchases,  eleven  lines;  Sales,  twelve  lines;  J.  C.  Mason, 
five  lines;  Walter  Love,  six  lines;  J.  C.  Miller,  five  lines;  Robert  Whitacre,  five 
lines;  W.  O.  Crosswhite,  seven  lines;  Davis  Bros.,  five  lines;  Smith  Shoe  Company, 
six  lines.  Give  each  customer  and  creditor  a  local  address. 
Oct.     2.     Bought  shoes  from  W.  O.  Crosswhite  on  account,  $187.65. 

3.     Sold  J.  C.  Mason  on  account  one  pair  of  shoes,  $11.50. 

5.     Bought  shoes  from  Davis  Bros,  on  account  $281.36. 

7.     Received  for  cash  sales  of  shoes,  $127.50. 

9.     Paid  W.  O.  Crosswhite  $100.00  on  account. 

10.  Sold  Walter  Love  on  account  six  pairs  of  shoes,  $56.50. 

11.  Bought  shoes  from  the  Smith  Shoe  Company  on  sixty  days'  time,  $211.85. 

12.  Received  for  cash  sales  of  shoes,  $97.50. 

13.  Paid  W.  O.  Cro.sswhite  $87.65  in  full  of  account. 

14.  Sold  J.  C.  Miller  on  account  two  pairs  of  shoes,  $25.25. 

16.  Received  for  cash  sales  of  shoes,  $106.95. 

17.  Allowed  Walter  Love  credit  for  one  pair  of  shoes  returned,  $17.50. 

18.  Bought  shoes  from  W.  O.  Crosswhite  on  account,  $321.85. 

19.  Paid  $82.50  for  shoes  purchased  and  delivered  today. 

20.  Paid  Mrs.  W.  C.  Davis  $6.00  for  a  pair  of  shoes  returned  for  which  she 

had  paid  cash  when  sold  to  her. 
23.     Received  $39.00  from  Walter  Love  in  full  of  account. 

25.  Paid  the  Smith  Shoe  Company  $25.00  on  account. 

26.  Received  for  cash  sales  of  shoes,  $88.90. 

27.  Paid  the  Lawton  Transfer  Co.  $65.50  for  freight  and  drayage  on  shoes 

purchased. 

28.  Sold  Robert  W'hitacre  one  pair  of  shoes  on  account,  $15.00. 

30,  Bought  shoes  from  the  Smith  Shoe  Company  on  sixty  days'  time,  $175.75. 

31.  Davis  Bros,  allowed  us  credit  for  $62.50  for  shoes  returned  to  them. 
When  these  transactions  have  been  recorded  in  the  accounts,  prove  the  equality 

of  the  debits  and  credits  by  a  Trial  Balance  of  totals. 
*See  note  at  the  bottom  of  page  13. 


26  RECORDING  TRANSACTIONS  IN  THE  JOURNAL. 

Exercise  No.  8,  Recording  Transactions  Direct  in  the  Ledger. 

Record  on  ledger  paper  the  following  transactions  performed  by  F.  B.  Bellis, 
a  retail  candy  merchant,  during  the  week  beginning  July  5.  Allow  space  for  the 
accounts  as  follows:  Cash,  eleven  lines;  Purchases,  ten  lines;  Sales,  twelve  lines; 
Candy  Kitchen,  seven  lines;  Robert  Farland,  five  lines;  Norway  Candy  Co.,  six 
lines;  R.  H.  Hunter,  five  lines.  Give  each  person  a  local  street  address. 
July  5.  Purchased  from  the  Candy  Kitchen,  City,  on  account,  $65.84. 
Cash  sales  for  the  day,  $62.48. 

6.  Paid  cash  for  nuts  purchased,  $9.50. 
Cash  sales  for  the  day,  $55.80. 

7.  Sold  Robert  Farland,  City,  on  account,  six  boxes  of  candy  at  *$2.75. 
Purchased  from  the  Norway  Candy  Co.,  City,  on  account,  $32.75. 
Cash  sales  for  the  day,  $41.90. 

8.  Paid  the  Candy  Kitchen  $50.00  on  account. 

Paid  a  customer  $1.00  for  a  box  of  candy  which  he  had  purchased  for 

cash  and  returned  per  agreement. 
Cash  sales  for  the  day,  $41.80. 

9.  Received  $10.00  from  Robert  Farland  on  account. 

Sold  R.  H.  Hunter,  City,  on  account,  twelve  boxes  of  candy  at*  $2.25. 
Purchased  from  the  Candy  Kitchen,  City,  on  account,  $61.50. 
Cash  sales  for  the  day,  $52.80. 

10.  Paid  cash  for  chew^ing  gum,  $5.00. 

Paid  the  Candy  Kitchen  $25.00  on  account. 

Purchased  from  the  Norway  Candy  Co.,  City,  on  account,  $26.95. 
.    Returned  to  the  Candy  Kitchen  six  boxes  of  candy  purchased  on  the  9th 
and  received  credit  for  the  same  at  $1.75  per  box,  the  cost  price. 
Cash  sales  for  the  day,  $101.19. 
When  these  transactions  have  been  recorded  in  the  accounts,  prove  the  equality 
of  the  debits  and  credits  by  a  Trial  Balance  of  balances. 

RECORDING  TRANSACTIONS  IN  THE  JOURNAL 

§  30.  Transactions  with  customers  on  account  and  with  creditors  may  be 
recorded  in  the  journal  in  the  same  manner  as  cash  transactions.  When  credit  is 
extended  to  a  customer,  his  name  is  written  in  the  journal  as  the  account  debited, 
and  the  Sales  account  credited;  when  credit  is  extended  to  the  business,  the  Pur- 
chases account  is  debited,  and  the  name  of  the  creditor  is  written  as  the  account 
credited.  Unless  a  copy  of  the  items  sold  to  a  customer  is  retained,  a  description 
of  the  articles  should  be  given  in  the  explanation  of  the  transaction  in  the  journal 
because  this  information  may  be  needed  for  reference.  Usually  a  list  of  the  mer- 
chandise purchased  is  supplied  by  the  creditor;  hence  it  is  not  necessary  to  itemize 
the  articles  purchased  in  the  explanation  of  the  transaction. 

The  following  transactions  affecting  the  purchases  and  sales  of  merchandise 
for  cash  and  on  account,  performed  by  J.  H.  Henderson,  a  retail  furniture  dealer, 
during  the  month  of  November,  are  shown  recorded  in  the  journal  in  Illustration 
No.  II.  These  transactions  are  the  same  as  those  on  page  21. 
Nov.  I.  Purchased  furniture  from  the  Consolidated  Furniture  Co.,  Grand 
Rapids,  on  sixty  days'  time,  $215.75. 

2.     Sold  C.  H.  Powers,  Arlington,  on  account,  one  bedroom  suite,  $125.00. 

6.     Sold  Walter  Rogers,  City,  on  account,  one  hatrack,  $22.50. 

{Concluded  on  page  28.) 
*NOTE.     The  word  "at,"  appearing  before  the  price,  indicates  that  this  price  is  per  unit; 
if  this  word  does  not  appear,  the  price  given  appHes  to  the  quantity  mentioned.     "Six  boxes  candy 
at  $2.75"  means  that  the  amount  of  the  sale  is  5^16.50.     "Six  boxes  candy,  $2.75,"  means  that  the 
amount  of  the  sale  is  $2.75. 


RECORDING  TRANSACTIONS  IN  THE  JOURNAL. 


27 


^^^ 


*<<^  C-*;^ 


r 


^7^- 


/ 


>^ 


cin^  ^  T-^r-^-^ 


2-  /  .^  -7^ 


/    >. 


/    >^' 


.;^^ 


>•  ?' 


/ 


0  >^^ 
/  a  0 

7^^ 

v^.^-^, 


>J>-^ 

-J-o 

Illustration  No.  11,  A  Journal  Page  with  Transactions  Recorded  on  it. 

EXPLANATION.  The  numbers  in  the  foHo  column  indicate  the'page  of  the  ledger  to  which 
each  entry  is  posted.  These  numbers  are  not  entered  when  the  transactions__are  recorded  in  the 
journal,  but  at  the  time  the  amounts  are  posted  to  the  ledger  accounts. 


28 


RECORDING  TRANSACTIONS  IN  THE  JOURNAL. 


12. 

14. 
20. 

25- 

26. 
29. 


{Continued  from  page  26.) 
Received  cash  for  furniture  sold  today,  $625.50. 
Paid  the  Consolidated  Furniture  Co.  $100.00  on  account. 
Received  $22.50  from  Walter  Rogers  in  payment  for  the  hatrack  sold 

him  on  the  6th. 
Received  $25.00  from  C.  H.  Powers  to  apply  on  account. 
Sold  C.  H.  Powers  on  account  three  leather  rockers  at  $25.50  each. 
C.  H.  Powers  returned  one  rocker  and  was  allowed  credit  for  $25.50. 


Pf'i^-!^         y  (^  a   ^=6€t.yt<f  0-/  S-Z-J-'/ 


"■"  ■    -- 

'\ 

^^ 

4^cz^^L.^^ 

.1.     

^^n/-. 

/ 

0-' 

>/j- 

1 
7-^ 



1 

If 

' 

1 

4^> 

-— 

^ 

V^      . 

-  1 

1        1 

^f 

Q' 

y,J- 

>' 

/>v>- 

A 

C 

i 

^  ?•  J-  <^ 

!  • 

^ 

/>■ 

^  /             ^    >  .>-    JT-  ^ 

^^ 

?' 

i.        r/ 

J-  0 

Illustration  No.  12,  A  Ledger  with  Six  Accounts  Resulting  from  Posting. 

EXPLANATION.  The  transactions  in'  this  ledger  were  not  recorded  direct  in  it,  but  were 
recorded  in  the  journal  shown  in  Illustration  No.  11  and  posted  to  it,  as  indicated  by  the  figures  in 
the  folio  column  of  each  account.  Compare  with  Illustration  No.  9  and  note  the  information  in 
column  4.    A  Trial  Balance  of  totals  taken  from  this  ledger  would  be  the  same  as  Illustration  No.  10. 


RECORDING  TRANSACTIONS  IN  THE  JOURNAL. 


29 


Exercise  No.  9,  Recording  Transactions  in  the  Journal  and  Posting. 

Record  on  journal  paper  the  following  transactions  performed  by  the  Central 
Paper  Co.  during  the  month  of  February.  Give  ea:h  customer  and  creditor  a 
local  address. 

Feb.      I.     Purchased  paper  from  the  Whiting  Paper  Co.  on  account.  $350.00. 

2.  Sold  paper  to  the  Federal  Press  on  account,  $126.50. 

3.  Received  $352.10  for  paper  sold  today. 

5.  Purchased  envelopes  from  the  U.  S.  Envelope  Co.  on  account,  $207.60. 

6.  Received  S126.50  from  the  Federal  Press  in  full  of  account. 

7.  Sold  paper  to  C.  J.  Krehbiel  &  Co.  on  account,  $200.25. 
Q.  Paid  the  Whiting  Paper  Co.  $150.00  on  account. 

12.  Purchased  paper  from  the  Whitaker  Paper  Co.  on  account,  $409.37. 

14.  Paid  $106.16  for  freight  and  drayage  bills  to  date. 

16.  Sold  paper  to  C.  VJ.  Ogden  on  account,  $98.66. 

19.  Received  credit  from  the  U.  S.  Envelope  Co.  for  $36.50,  \'alue  of  en- 

velopes returned  b\'  us  per  agreement. 

20.  Received  for  cash  sales  of  paper  today,  $191.96. 

21.  Received  S200.25  from  C.  J.  Krehbiel  &  Co.  in  full  of  account. 

23.  Sold  paper  and  envelopes  to  the  Federal  Press  on  account,  $161.52. 

24.  Allowed  C.  W.  Ogden  credit  for  paper  returned,  $12.50. 

26.  Paid  the  Herrlinger  Paper  Co.  S76.60  for  paper  delivered  today. 

27.  Sold  paper  and  envelopes  to  C.  J.  Krehbiel  &  Co.  on  account,  $112.60. 

28.  Paid  the  U.  S.  Envelope  Co.  balance  due  on  account.  $171.10. 
Received  $40.00  from  C.  W.  Ogden  on  account. 

When  the  above  transactions  have  been  recorded  in  the  journal  as  instructed, 
open  accounts  on  a  sheet  of  ledger  paper  with  Cash  (9).  Purchases  (9),  Sales  (11), 
Federal  Press  (6),  C.  J.  Krehbiel  &  Co.  (6),  C.  W.  Ogden  (6),  Whiting  Paper  Co. 
(5),  U.  S.  Envelope  Co.  (6),  Whitaker  Paper  Co.  (5),  allowing  for  each  account  the 
number  of  lines  indicated ;  post  the  transactions,  and  prove  the  posting  by  a  Trial 
Balance  of  totals. 


Exercise  No.  10,  Recording  Transactions  in  the  Journal  and  Posting. 

Record  on  journal  paper  the  following  transactions  performed   during  the 
month  of  May  by  J.  O.  Cutshaw,  an  automobile  tire  dealer: 


iMc 


I. 

3- 
5- 

7- 
10. 
12. 


14 
16. 
20. 


Purchased  from  the  Goodyear  Tire  Co.,  City,  on  account,  $355.00. 
Received  cash  for  four  Goodyear  33  x  4  cord  tires,  $215.60. 
Purchased  from  the  Goodrich  Tire  Co.,  Clt}^  on  account,  $525.50. 
Sold  the  Central  Grocery  Co.,  City,  on  account,  two  Ford  tires,  $32.65. 
Received  cash  for  one  35  x  5  Silvertown  cord  tire,  $67.50. 
Paid  the  Goodyear  Tire  Co.  $200.00  on  account. 
Sold  I.  W.  Walker,  City,  on  account,  four  Miller  cord  tires  at  $52.45 

each. 
Gave  I.  W.  Walker  credit  for  one  of  the  tires  sold  him  on  the  12th  and 

returned  by  him  today  per  agreement. 
Received  for  cash  sales  of  tires,  $278.50. 

Received  S32.65  from  the  Central  Grocery  Co.  in  full  of  account. 
Sold  W.  L.  Watson,  City,  on  account,  two  33  x  4  Fisk  cord  tires  at 

$48.00;    these  tires  are  not  carried  in  stock  and  were  purchased  from 

the  Fisk  Tire  Co.,  City,  on  account,  at  $36.00. 
Record  the  sale  and  purchase  as  separate  transactions. 

(Concluded  on  page  30.) 


30  QUESTIONS  ON  RECORDING  TRANSACTIONS. 

{Exercise  No.  lo — Continued  from  page  2g.) 

25.  Sold  David  Jordan.  City,  on  account,  two  32  x  4  Silvertown  cord  tires 

at  $41.60  each. 

26.  Paid  the  Goodrich  Tire  Co.  $200.00  on  account. 

27.  Received  $50.00  from  W.  L.  Watson  to  apply  on  account. 

28.  Paid  the  Fisk  Tire  Co.  $72.00  in  full  of  account. 

Returned  to  the  Goodrich  Tire  Co.  two  32  x  4  fabric  tires  and  received 
credit  for  $34.60. 
31.     Received  for  cash  sales  of  tires,  $315.50. 

Purchased  from  the  Goodyear  Tire  Co.,  City,  on  account,  $452.40. 

When  the  above  transactions  have  been  recorded  in  the  journal  as  instructed, 
open  accounts  on  a  sheet  of  ledger  paper  with  Cash  (10),  Purchases  (8),  Sales  (12), 
Goodyear  Tire  Co.  (6),  Goodrich  Tire  Co.  (6),  Fisk  Tire  Co.  (5),  Central  Grocery 
Co.  (5),  I.  W.  Walker  (5),  W.  L.  Watson  (5),  David  Jordan  (5),  allowing  for  each 
account  the  number  of  lines  indicated ;  post  the  transactions,  and  prove  the  posting 
by  a  Trial  Balance  of  balances. 


QUESTIONS 

1.  If  a  merchant  buys  merchandise  on  March  2,   1922,    with    the    privilege   of 

paying  for  the  same  within  sixty  days,  on  what  date  will  he  be  required  to 
pay  the  amount? 

2.  Why  is  it  not  necessary  to  keep  an  account  with  the  person  to  whom  the 

business  sells  for  cash? 

3.  Is  an  amount  due  from  a  customer  one  of  the  assets  of  the  business? 

4.  Would  you  consider  the  asset  of  the  business  described  as  "Accounts  Receiv- 

able" as  valuable  as  the  asset  described  as  "Cash?"    Give  reasons  for  your 
answer. 

5.  Distinguish  between  the  meaning  of  the  terms  "creditor"  and  "customer.',' 

6.  Why  is  it  necessary  for  the  bookkeeper  to  indicate  payments  made   to  apply 
on  merchandise  purchased  or  sold  on  a  designated  date? 

Would  it  be  possible  for  an  account  with  a  customer  to  show  a  credit  balance? 

Explain. 
Would  it  be  possible  for  an  account  with  a  creditor  to  show  a  debit  balance? 

Explain. 
Why  is  it  advisable  to  rule  an  account  receivable  or  an  account  payable  when 

the  two  sides  are  equal? 

10.  Open  an  account  with  Robert  Jones,  a  customer  of  the  business,  and  record 

the  following  transactions  in  it: 

Jan.   10.     Sold  merchandise  on  account,  $425.00. 

15.     Received  $100.00  to  apply  on  account. 

20.     Sold  merchandise  on  account,  $72.50. 

31.     Received  $200.00  to  apply  on  sale  of  the  loth. 
Feb.   10.     Received  $72.50  in  full  for  sale  of  Jan.  20. 

11.  Why  is  it  not  necessary  to  show  on  the  Trial  Balance  an  account  which  is  in 

balance? 

12.  What  effect  would  it  have  on  the  Trial  Balance  if  an  account  which  shows  a 

debit  balance  of  $10.00  was  omitted  because  it  was  ruled  by  mistake? 

13.  What  accounts  are  affected  when  the  business  receives  cash  from  a  customer 

in  part  payment  of  his  account? 

14.  What  accounts  are  affected  when  cash  is  i)aid  to  a  creditor  to  apply  on  an 

account  owed  him? 


QUESTIONS  ON  RECORDING  TRANSACTIONS.  31 

15.  If  a  sale  made  to  a  customer  on  account  should  not  be  recorded,  would  this 

affect  the  equality  of  the  debits  and  credits  on  the  Trial  Balance? 

16.  Can  you  suggest  a  plan  which  would  avoid  the  possibility  of  failing  to  record 

transactions  in  which  merchandise  is  sold  on  account? 

17.  If  a  sale  is  made  to  a  customer  for  cash  and  the  transaction  is  not  recorded, 

how  would  the  bookkeeper  detect  the  error? 

18.  If  cash  is  received  from  a  customer  in  payment  of  his  account,  and  the  trans- 

action is  not  recorded  how  would  the  bookkeeper  detect  the  error? 

19.  If  merchandise  is  purchased  from  a  creditor  on  account  and  the  transaction 

is  not  recorded,  how  would  the  bookkeeper  detect  the  error? 

20.  If  cash  is  paid  for  merchandise  purchased  and  the  transaction  is  not  recorded, 

how  would  the  bookkeeper  detect  the  error? 

21 .  If  a  sale  is  made  to  one  customer  and  by  mistake  debited  to  another  customer, 

will  this  affect  the  equality  of  the  debits  and  credits  on  the  Trial  Balance? 

22.  How   would    the   bookkeeper  detect   the   error   mentioned   in   the   preceding 

question? 
2T).     If  a  customer's  account,  which  is  not  in  balance,  is  ruled  by  mistake,  how 
would  the  bookkeeper  discover  the  error? 

24.  Why  is  it  advisable  to  indicate  the  address  of  a  customer  on  his  account  in 

the  ledger? 

25.  If  the  two  sides  of  the  Trial  Balance  are  not  equal,  how  would  the  bookkeeper 

ascertain  the  error? 


Chapter  IV 

RECORDING  TRANSACTIONS- Continued 

§  31.  Expense.  Each  business  has  a  building  or  place  in  which  to  carry  on 
its  operations;  this  building  or  place  of  business  is  provided  with  heat  and  light; 
modern  business  requires  the  use  of  the  telephone,  telegraph,  and  other  means  of 
rapid  communication ;  clerks  are  employed  to  assist  with  the  purchasing  and  selling 
of  the  merchandise  or  service  which  the  business  sells;  bookkeepers  and  stenog- 
raphers are  required  in  connection  with  the  ofhce  operations;  the  owner  recei\'es  a 
compensation  for  his  services  in  connection  with  the  operations  of  the  business; 
these  and  many  other  services  must  be  purchased  and  paid  for  by  the  business. 
Such  services  are  usually  referred  to  as  the  "operating  cost"  of  the  business,  also 
the  "expenses"  of  the  business.  The  term  "expenses"  also  include  any  material 
purchased  by  the  business  which  will  be  consumed;  this  class  of  material  includes 
books  of  account  for  use  in  the  ofifice,  stationery,  wrapping  paper,  twine,  nails 
for  packing  cases,  etc.  The  cost  of  material  regarded  as  expense  is  usually  shown 
in  an  account  separate  from  the  amounts  paid  for  services;  this  will  be  discussed 
later  in  more  detail. 

A  record  of  the  payments  for  operating  cost  (expenses)  is  made  in  one  or  more 
accounts,  depending  on  the  extent  of  the  business  operations.  When  cash  is  given 
in  payment  for  services  or  property  which  is  regarded  as  an  expense  item,  the  ac- 
count which  is  to  show  a  record  of  this  operating  cost  is  debited  and  the  Cash 
account  credited ;  should  an  asset  other  than  cash  be  given,  the  account  which  shows 
the  value  of  the  asset  parted  with  is  credited  instead  of  the  Cash  account. 


EXPENSE  ACCOUNT 

§  32.  The  Purpose  of  this  Account  is  to  show  the  cost  of  operating  the 
business,  that  is,  its  expenses.  If  all  operating  cost  is  debited  to  one  account,  the 
total  cost  of  the  business  operations  will  be  shown  in  this  account.  The  debits  and 
credits  given  below  refer  to  only  one  Expense  account;  other  expense  accounts 
will  be  discussed  later. 

Debit  the  Expense  Account:  Credit  the  Expense  Account: 

T[  I.     For  amounts  paid  for  operating  ^  2.     For  any  adjustments  which  re- 

cost  as  outlined  in  §  31.  duce    the    operating    cost    as 

shown  by  the  debit  side. 

\  3.  The  Balance  of  this  Account  shows  the  operating  cost  of  the  business 
for  the  period  co\^ered  by  the  debits  and  credits  to  the  account.  The  total 
expense  is  a  deduction  from  the  profit  made  by  the  operations  of  the  business. 

§  33.  Capital.  It  is  usually  necessary  for  the  owner  of  the  business  to  have 
cash  or  other  property  at  the  beginning  of  the  business,  because,  if  the  business  is 
to  supply  a  demand,  it  must  have  on  hand  those  things  which  its  customers  wall 
wish  to  purchase.  The  cash  or  other  property  which  the  owner  assigns  to  the  oper- 
ations of  the  business  at  its  beginning  is  regarded  as  an  investment  in  the  business 
and  referred  to  as  the  "capital  of  the  business." 

If,  during  the  course  of  the  business,  additional  capital  is  needed,  the  owner 
may  find  it  necessary  to  add  to  his  capital.    This  he  can  do  by  one  of  three  ways: 

32 


CAPITAL  ACCOUNT.  33 

(a)  by  investing  additional  assets;  (b)  by  purchasing  merchandise  on  account; 
(c)  by  borrowing  from  the  bank.  If  the  operations  of  the  business  are  successful — 
that  is,  if  it  is  receiving  more  for  the  merchandise  or  service  which  it  sells  than  the 
cost  of  the  same  plus  the  operating  cost  of  the  business — the  owner's  interest 
(proprietorship)  will  be  increased  by  this  profit;  if  the  result  of  operating  the 
business  is  a  loss,  the  owner's  interest  (proprietorship)  will  be  decreased  by  this 
loss.  Usually  once  each  year,  the  amount  of  the  profit  or  loss  for  the  year  is  ascer- 
tained and  the  owner's  Capital  account  credited  or  debited  with  the  same;  this 
permits  his  account  to  show  his  present  interest  in  the  business. 

The  owner  may,  if  he  desires,  withdraw  a  part  of  the  capital  which  he  has  in- 
\ested  or  a  part  of  the  profit  resulting  from  the  operations  of  the  business.  These 
withdrawals  from  investment  or  profits  do  not  include  any  amounts  which  the 
owner  receives  from  the  business  for  the  services  he  has  rendered  the  business, 
because  such  items  are  operating  cost  the  same  as  salaries  paid  employees.  When 
the  owner  decides  to  withdraw  amounts  from  the  business  in  payment  for  his 
services  rendered  to  the  business,  these  should  be  charged  against  a  fixed  salary. 
When  this  plan  is  followed,  it  is  customary  to  credit  a  Personal  account  with  the 
proprietor  for  the  amount  of  his  salary  and  debit  this  account  with  the  withdrawals 
against  salary.  Unless  this  plan  is  followed,  the  amounts  paid  by  the  business  to 
the  owner  for  services  he  has  rendered  the  business  will  not  appear  as  an  operating 
cost  of  the  business.    The  owner's  Personal  account  will  be  discussed  in  detail  later. 

CAPITAL  ACCOUNT 

§  34.  The  Purpose  of  this  Account  is  to  show  the  result  of  transactions 
which  the  business  has  with  the  owner  of  the  business  as  they  relate  to  investments 
and  withdrawals. 

Debit  the  Capital  Account:  Credit  the  Capital  Account: 

If  I.     For    any    debts    owed    by    the  ^  4.     For    cash    or    other    assets    in- 

owner  at  the  beginning  of  the  vested  at  the  beginning  of  the 

business  if  they  are  assumed  business. 

by  the  business.  ■  ^5.     For  subsequent  investments. 

Tf  2.     For    amounts    withdrawn    from  ^1  6.     For  the  net  profit  at  the  end  of 

the    capital    invested.      This  the  business  year  if  the  results 

does     not     include     amounts  of  the  operations  of  the  busi- 

withdrawn    for    services    ren-  ness  have  been  a  profit. 

dered  to  the  business. 
^  3      For  the  net  loss  at  the  end  of  the 

business  year  if  the  results  of 

the  operations  of  the  business 

have  been  a  loss. 

^  7.  The  Balayice  of  this  Account,  before  the  debit  or  credit  mentioned  in 
^^3  and  6  have  been  made,  shows  the  net  investment  of  the  owner,_  After  the 
profit  or  loss  as  described  in  ^^  6  and  3  has  been  credited  or  debited  to  the  account, 
the  balance  will  show  the  owner's  interest  in  the  business,  that  is,  his  proprietorship. 

RECORDING  TRANSACTIONS  DIRECT  IN  THE  LEDGER 

§  35.  The  Complete  Operations  of  a  business  include  transactions  which 
relate  to  the  investment  at  the  beginning  of  the  business,  the  purchases  and  sales 
of  merchandise,  and  the  payment  of  operating  expenses.  All  of  these  transactions 
may  be  recorded  direct  in  the  ledger  as  explained  in  §§  19  and  29. 

The  following  transactions  relative  to  the  complete  operations  of  a  business 
(including  investment,  operating  cost,  and  purchases  and  sales  of  merchandise  for 

{Concluded  on  page  35.) 


34  RECORDING  TRANSACTIONS  IN  THE  LEDGER. 


^^cJ-. 


/ 


^-o  o 


o-U 


/r 


f  "" — ^^ 
'        7 


^0^. 


>/• 


/  >/  -^^ 


^i^^ 


1 --«t<?^-«a^ 


/(K^Z-tsc.-e.'y<t^-'f?d^ 


C^_^c^-<:->^^.JZ^^-^>T-^ 


Illustration  No.  13,  A  Ledger  with  Eight  Accounts. 

EXPLANATION.  This  ledger  contains  a  record  of  the  transactions  outlined  in  §  35,  recorded 
direct  in  the  ledger.  It  is  the  same  as  Illustrations  Nos.  3  and  9  with  the  addition  of  accounts  with 
the  owner  and  Exjjcnse.  Whether  only  a  part  or  all  of  the  transactions  in  connection  with  the  oper- 
ations of  a  business  are  recorded,  each  transaction  affects  two  accounts,  one  showing  the  value 
received  recorded  on  the  debit  side  and  the  other  the  value  parted  with  recorded  on  the  credit  side. 
The  same  amount  in  each  transaction  is  recorded  on  the  debit  side  of  one  account  and  on  the  credit 
side  of  another  account. 


RECORDING  TRANSACTIONS  IN  THE  LEDGER. 


35 


cash  and  on  account),  perlornied  by  M.  E.  Studebaker  during  the  month  of  October, 
are  shown  recorded  direct  in  accounts  with  Cash,  Purchases,  Sales,  Capital,  Expense, 
customers,  and  creditors,  in  Illustration  No.  13.  A  Trial  Balance  of  balances  made 
from  these  accounts  is  shown  in  Illustration  No.  14. 

Oct.     I.  M.  E.  Studebaker  invested  $1,000.00  in  the  office  supplies  business. 

7.  Purchased  from  A.  R.  King,  Clinton,  on  account,  merchandise,  $317.65. 

10.  Received  $75.50  for  cash  sales  of  merchandise. 

18.  Sold  E.  B.  Moore,  305  Elm  St.,  City,  on  account,  one  desk  $75.00. 

24.  Paid  A.  R.  King  $200.00  on  account. 

28.  .Sold  J.  W.  Macon,  222  Main  St.,  City,  on  account,  three  filing  sections, 

$127.50. 

31.  Paid  rent  of  store,  $50.00. 


/y 


^[^'^a 


^ 


s 


V- 


y^;2i.-7'^c-^Ctfz-«£-^-^ 


3\/ 


\5-'a 


J~a 


7- 


/\a\a  \o 


\A 


V- 


/  J^  jr-^^jj; /^  <f^ 


^  ^ 


Illustration  No.  14,  i\  Trial  Balance  of  Balances  Made  from  the  Ledger  Accounts 

in  Illustration  No.  13. 

Exercise  No.  11,  Recording  Transactions  Direct  in  the  Ledger. 

Record  on  ledger  paper  the  following  transactions  performed  during  the  first 
half  of  May  by  R.  H.  Gillespie,  a  retail  clothing  dealer.  Allow  space  for  the  accounts 
as  follows:  Cash,  ten  lines;  Purchases,  eleven  lines;  Sales,  nine  lines;  Expense, 
six  lines;  R.  H.  Gillespie,  Capital,  five  lines;  A.  C.  Dugan,  six  lines;  A.  R.  Isaacs, 
five  lines;  Charles  Heane3^  five  lines;  Davis  Bros.,  six  lines;  Globe  Clothing  Co.. 
five  lines;  Pope  Clothing  Co.,  five  lines.  Give  each  customer  and  creditor  a  local 
address. 
May     I.     R.  H.  Gillespie  invested  $2,500,00  in  the  retail  clothing  business. 

2.  Bought  of  Davis  Bros.,  on  account,  merchandise^  $318.67. 
Bought  of  Brand  Bros.,  for  cash,  merchandise,  $362.55. 

3.  Bought  of  the  Globe  Clothing  Co.,  on  account,  merchandise,  $196.50. 
Sold  A.  C.  Dugan,  on  account,  one  suit  of  clothes,  $65.00. 

4.  Bought  of  Brand  Bros.,  for  cash,  merchandise,  $318.62. 

5.  Sold  for  cash  one  suit  of  clothes,  $65.00;   one  spring  overcoat,  $50.00. 

6.  Sold  A.  R.  Isaacs,  on  account,  one  suit  of  clothes,  $60.00;  five  shirts  at 

$2.50  each. 
9.     Paid  the  Globe  Clothing  Co.  $196.50  in  full  of  account. 

Sold  Charles  Heaney,  on  account,  one  suit  of  clothes,  $50.00;   one  vest, 
$10.00. 

{Concluded  on  page  36.) 


36  RECORDING  TRANSACTIONS  IN  THE  LEDGER. 

{Exercise  No.  ii — Continued  from  page  35.) 

Ma\-   10.     Bouglit  of  the  Pope  Clothing  Co.,  on  account,  merchandise,  $269.96. 
Sold  A.  C.  Dugan,  on  account,  one  spring  overcoat,  $85.00;   six  ties  at 
$1.25  each. 

11.  Received  $60.00  from  Charles  Heaney  in  full  of  account. 

12.  Bought  of  Brand  Bros.,  for  cash,  merchandise,  $327.16. 

13.  Paid  $12.00  for  telephone  service. 

14.  Received  $25.00  from  A.  R.  Isaacs  in  part  payment  of  the  merchandise 

sold  him  on  the  6th. 

15.  Bought  of  Davis  Bros.,  on  account,  merchandise,  $105.81. 
Paid  rent,  $80.00;  salaries  of  clerks.  $75.00. 

When  these  transactions  have  been  recorded  in  the  accounts,  prove  the  equality 
of  the  debits  and  credits  bv  a  Trial  Balance  of  totals. 


Exercise  No.  12,  Recording  Transactions  Direct  in  the  Ledger. 

Record  on  ledger  paper  the  following  transactions  performed  during  the  month 
of  May  by  W.  L.  Kirby,  a  retail  paint  merchant.  Allow  space  for  the  accounts 
as  follows:  Cash,  eleven  lines;  Purchases,  eleven  lines;  Sales,  twelve  lines;  Ex- 
pense, five  lines;  W.  L.  Kirby,  Capital,  five  lines;  Jones  Bros.,  six  lines;  Cowan 
Bros.,  six  lines;  W.  L.  Luttrell,  six  lines;  W.  H.  Rowland,  six  lines;  C.  A.  Norman, 
seven  lines;   National  Paint  Co.,  five  lines;    Marcus  Franklin,  five  lines. 

May     I.     W.  L.  Kirby  invested  $2,500.00  in  the  retail  paint  business. 

Bought  of  Jones  Bros.,  Uniontown,  on  account,  merchandise,  $221.35. 
Paid  one  month's  rent  in  advance,  $75.00. 
2.     Bought  of  Cowan  Bros.,  City,  ten  days,  merchandise,  $86.49. 

Sold  W.  L.  Luttrell,  City,  on  account,  merchandise  per  Sale  No.  i. 
$4.2.50.  The  sale  number  indicates  that  a  copy  of  the  items  sold 
has  been  retained. 

4.  Paid  the  National  Paint  Co.,    New   York,    cash    for    merchandise    pur- 

chased, $798.57. 

5.  Sold  W.  H.  Howland,  Middletown,  on  account,  merchandise  per  Sale  No. 

2,  $75.80. 
Received  for  cash  sales  of  merchandise,  $110.00. 
7.     Paid  Cowan  Bros.  $86.49  in  full  of  account. 

Sold  C.  A.  Norman,  Citv,  on  account,  merchandise  per  Sale  No.   3, 
$87.50.. 
9.     Bought  of   National    Paint    Co.,    New    York,    twenty   da\s,    merchan- 
dise, $i7i.58. 

10.  Sold  W.   L.   Luttrell,   Citv,  on  account,   merchandise  per  Sale  No.  4, 

$78.75- 

11.  Received  $50.00  from  C.  A.  Norman  to  apply  on  account. 

12.  Bought  of  Cowan  Bros.,  City,  on  account,  merchandise,  $93.25. 
14.     Received  $75.80  from  W.  H.  Howland  in  full  of  account. 

16.  Bought  of  Marcus  Franklin,  Ardmore,  five  days,  merchandise,  $218.32. 

17.  Bought  of  Jones  Bros.,  Uniontown,  on  account,  merchandise,  $172.50. 

18.  Paid  Marcus  Franklin  $218.32  in  full  of  account. 

Sold  W.  H.  Howland,  Middletown,  on  account,  merchandise  per  Sale 
No.  5,  $88.-50. 

19.  Sold  C.  A.   Norman,   City,  on  account,   merchandise  per  Sale  No.  6, 

$32.45- 
21.     Received  $30.00  from  W.  L.  Luttrell  to  apply  on  account. 

(Conchided  on  page  37.) 


RECORDING  TRAXSACTIOXS  IN  THE  JOURXAL.  37 

{Exercise  No.  12 — Continued  from  page  36.) 

Ma\  21.     Sold  C.  O.  Baily,  for  cash,  20  gallons  I.  X.  L.  paint  at  $4.75,  $95.00. 
24.     Paid  Jones  Bros.  $100.00  to  appK'  on  account. 

C.  A.  Norman  returned  one  gallon  paint  purchased  from  us  on  the  19th 
and  was  granted  credit  for  $3.00.     He  paid  cash,  $29.45,  for  the  bal- 
ance due  on  this  sale. 
Enter  as  two  separate  transactions. 
26.     Gave  a  customer  $2.00  in  payment  for  paint  purchased  from  us  for  cash 

and  returned  per  agreement. 
29.     Paid  the  National  Paint  Co.  S171.58.in  full  of  account. 

C.  O.  Bailey  returned  2  gallons  I.  X.  L.  paint  purchased  on  the  21st 

and  accepted  in  exchange  for  it  4  gallons  varnish. 
No  entry  is  required.    Why? 
31.     Received  credit  from  Jones  Bros,  for  $12.00,  value  of  3  gallons  paint 
purchased  on  the  17th  and  returned  by  us  per  agreement. 
When  these  transactions  have  been  recorded  in  the  accounts,  prove  the  equality 
of  the  debits  and  credits  by  a  Trial  Balance  of  balances. 

RECORDING  TRANSACTIONS  IN  THE  JOURNAL 

§  36.  Transactions  with  the  owner  and  with  operating  expenses  may  be 
recorded  in  the  journal  in  the  same  manner  as  transactions  in  which  merchandise 
is  purchased  or  sold  for  cash  or  on  account.  When  the  owner  invests  cash  or  other 
assets  in  the  business,  the  transaction  is  recorded  in  the  journal  by  writing  the  date, 
the  name  of  the  account  debited  and  amount,  the  name  of  the  account  credited 
and  amount,  and  the  explanation,  in  the  same  form  as  other  transactions;  each 
asset  invested  is  debited  to  the  account  which  is  to  show  its  value,  and  the  owner's 
Capital  account  credited.  When  the  owner  withdraws  a  part  of  his  capital,  the 
transaction  is  recorded  in  the  journal  in  the  same  form  as  the  entry  for  investment; 
in  this  case,  however,  the  owner's  Capital  account  is  debited  with  the  amount  of 
the  withdrawal,  and  the  account  which  shows  the  value  of  the  asset  withdrawn 
is  credited.  When  operating  costs  are  paid,  the  transaction  is  recorded  in  the 
journal  by  writing  the  date,  the  name  of  the  operating  account  affected  (usuallv 
Expense)  and  the  amount  of  the  payment,  the  name  and  amount  of  the  asset  parted 
with,  and  the  explanation. 

Before  recording  transactions  in  the  journal,  the  student  should  journalize 
each  one  mentally;  that  is,  he  should  determine  from  the  nature  of  the  transaction 
the  account  to  be  debited  and  the  account  to  be  credited.  Since  the  information 
which  the  owner  desires  is  obtained  from  the  accounts,  it  is  essential  that  the  proper 
accounts  be  debited  and  credited  in  each  transaction.  Should  an  amount  be  with- 
drawn by  the  proprietor  from  his  investment  and  be  debited  to  the  Expense  account, 
it  would  change  the  entire  meaning  of  the  reports  which  the  owner  would  receive 
from  the  bookkeeper.  The  same  fact  is  true  of  any  other  transaction  incorrectly 
recorded. 

The  following  transactions  relative  to  the  complete  operations  of  a  business 
(including  investment,  operating  cost,  and  the  purchases  and  sales  of  merchandise 
for  cash  and  on  account),  performed  by  M.  E.  Studebaker  during  the  month  of 
October,  are  shown  recorded  in  the  journal  in  Illustration  No.  15.  These  trans- 
actions are  the  same  as  those  at  the  top  of  page  35. 
Oct.     I.     M.  E.  Studebaker  invested  Si, 000. 00  in  the  office  supplies  business. 

7.     Purchased  from  A.  R.  King,  Clinton,  on  account,  merchandise,  $317.65. 
10.     Received  S75.50  for  cash  sales  of  merchandise. 
18.     Sold  E.  B.  Moore,  305  Elm  St.,  City,  on  account,  one  desk,  $75.00. 

{Concluded  on  page  38.) 


38 


RECORDING  TRANSACTIONS. 


(Continued  from  page  J y.) 

24.     Paid  A.  R.  King  $200.00  on  account. 

28.     Sold  J.  W.  Macon,  222  Main  St.,  City,  on  account,  three  filing  sections, 

$127.50. 
31.     Paid  rent  of  store,  $50.00. 


v~i^..^7^  / ,  /  <^  2— 


yf 


C 2JZ-c^>;*C^ 


t|^>Z.-Z/^A;^^^«if  .^<^<>2.<.^l!gy€<g/ 


7 


ff 


as 


3  /  /\k^      ' 


/  A  C.<«.<^^^Cr 


ctz.-'^-A^ 


:&.^2^. 


/r 


\{^ ^ P(^^€.:>-z^ 


\.^-^^iP-' 


-F 


3    / 


7? 


7^- 


'A 


'^o 


O-Zi- 


/^ 


y  2- 


7- 


/A.,j.r' 


\sra\ 


Illustration  No.  15,  A  Journal  Page  with  Transactions  Recorded  on  It. 

EXPLANATION    The  transactions  recorded  in  this  journal  are  outlined  in  §  36  which  begins 
on  page  37   and  is  concluded  at  the  top  of  this  page. 


/6 


(7-^    /r 


O-^.    >r 


RECORDING  TRANSACTIONS. 


39 


'^^ ^ ^?L<^-r?'y-^ 


~^l^>^. 


-»^ 


^ 


^^l^ 


-^^i%<t-e-:«-' AS^ 


-/  '       /  >-7  -^^ 


9r' 

r-r- -r— 

!                           : 

1  i  1  i  ! 

V- 

" 

!     '              ' 

L 

1— 

1- 

J 

Illustration  No.  i6,  A  Ledger  with  Eight  Accounts  Resulting  from  Posting. 
EXPLANATION.  This  ledger  shows  the  posting  of  the  transactions  recorded  in  the  journal, 
Illustration  No.  15.  The  amounts  entered  in  the  first  money  column  of  the  journal  appear  on  the 
debit  side  of  the  ledger  accounts,  and  the  amounts  entered  in  the  second  money  column  of  the  journal, 
on  the  credit  side  of  the  accounts.  A  comparison  of  Illustration  No.  13  with  this  illustration  will 
show  that  the  facts  are  the  same,  except  in  the  latter  the  folio  column  is  used. 


40 


RECORDING  TRANSACTIONS. 


Exercise  No.  13,  Recording  Transactions  in  the  Journal  and  Posting. 

Record  on  journal  paper  the  following  transactions  performed  during  the 
month  of  January  by  E.  B.  Taylor,  a  retail  grocer: 

Jan.     I.  E.  B.  Taylor  invested  $1,000.00  in  the  retail  grocery  business. 

2.  Bought  of  E.  C.  Cline,  Chicago,  on  account,  merchandise,  $77.30. 

3.  Bought  of  Langley  Bros.,  City,  thirty  days,  merchandise,  $134.95. 

4.  Paid  $20.00,  city  and  state  license  for  one  year. 

6.     Sold  A.  R.  Manley,  106  Elm  St.,  City,  on  account,  40  lbs.  Arbuckle 
coffee  at  20c;    i  bbl.  White  Lily  flour,  $6.25. 

When  the  sale  Includes  more  than  one  item,  the  explanation  in  the  journal  should  be  as 
follows: 

"Sold  on  account: 

40  lbs.  Arbuckle  Coffee  at  40c  $16.00 
I  bbl.  White  Lily  Flour  6.25." 

10.     Paid  J.  F.  Sherwood  $192.00  for  merchandise  purchased  today. 

12.  Received  $30.50  for  sundry  cash  sales. 

13.  Paid  E.  C.  Cline  $77.30  in  full  of  account. 

16.  Sold  Gibson  Hotel,  12  E.  4th  St.,  City,  ten  days,  6  bbls.  Roller  King 

flour  at  $5.10;    3  bbls.  White  Lily 'flour  at  $6.25;    40  lbs.  Arbuckle 
coffee  at  20c. 

17.  Sold  T.  L.  Staples,  Clinton,  sixty  days,  4  bbls.  Roller  King  flour  at  $5.10; 

4  cans,  200  lbs.,  lard  at  15c. 
20.     Received  $10.00  from  A.  R.  Manley  to  apply  on  account.     . 
23.     Bought  of  Logan  &  Moseley,   Centerville,  twenty  days,   merchandise, 
.   $228.60. 

26.  Sold  A.  R.  Manley,  106  Elm  St.,  City,  on  account,  5  bbls.  White  Lily 

flour  at  $6.25;    115  lbs.  Arbuckle  coft'ee  at  20c. 

27.  Received  $30.50  from  the  Gibson  Hotel  to  apply  on  account. 
30.     Received  $41.85  for  sundry  cash  sales. 

When  the  above  transactions  have  been  recorded  in  the  journal  as  instructed 
open  accounts  in  the  ledger  with  Cash  (q).  Purchases  (8),  Sales  (10),  Expense  (5), 
E.  B.  Taylor,  Capital  (5),  E.  C.  Cline  (5),  Langley  Bros.  (5),  A.  R.  Manley  (6), 
Gibson  Hotel  (5),  T.  L.  Staples  (5),  Logan  &  Moseley  (5),  allowing  for  each  account 
the  number  of  lines  indicated;  post  the  transactions,  and  prove  the  posting  by  a 
Trial  Balance  of  totals. 


Exercise  No.  14,  Recording  Transactions  in  the  Journal  and  Posting. 

Record   on  journal   paper   the   following  transactions  performed   during   the 
month  of  July  by  E.  H.  Weatherby,  a  retail  grocer: 

July     I.     E.  H.  Weatherby  invested  $1,500.00  in  the  retail  grocery  business. 

2.  Bought  from  Woodward  Bros.,  Morgantown,  on  account,  merchandise, 

$127.60. 

3.  Bought  from  Winters  &  Gay,   Batesville,  on   thirty  days'   time,   mer- 

chandise, $204.05. 
Paid  $20.00  cash  for  city  and  state  license. 

5.  Sold  J.  A.  Taylor,  22  Poplar  St.,  on  account,  25  lbs.  roasted  coft'ee  at 

33c;   50  lbs.  granulated  sugar  at  7c;   60  lbs.  bacon  at  23c. 
Bought  from  Chafin  &  Jones,  City,  for  cash,  merchandise,  $242.00. 

6.  Received  $22.50  for  sundry  cash  sales  to  date. 
Paid  Woodward  Bros.  $127.60  in  full  of  account. 

{Concluded  on  page  41.) 


RECORDING  TRANSACTIONS. 


41 


(Exercise  No.  14 — Contifiued  from  page  40.) 
Sold  the  Colonial   Hotel,  Washington  Ave.,  on  account,   5  bhh 


Blue 


9- 
10. 

12. 

13- 


15 
16 

17 

18 

19 
20. 


Ribbon  Hour  at  $9.10;  3  bbls.  White  Rose  flour  at  $9.75;  90  lbs. 
granulated  sugar  at  7c. 

Received  $15.00  from  J.  A.  Taylor  to  apply  on  account. 

Bought  from  Winters  &  Gay,  Batesville,  on  thirty  days'  time,  merchan- 
dise, $209.58. 

Received  $40.00  from  the  Colonial  Hotel  in  part  payment  for  merchan- 
dise sold  on  the  8th. 

Paid  Winters  &  Gav  $100.00  to  applv  on  merchandise  purchased  on  the 

3d. 
Sold  M.  J.  Sanders,  227  Beech  St.,  on  account,  5  bbls.  White  Rose  flour 

at  $9.75;    10  hams,  191  lbs.,  at  26c. 
Bought  from  Woodward  Bros.,  Morgantown,  on  account,  merchandise, 

$216.37. 
Sold  the  Colonial  Hotel,  Washington  Ave.,  on   account,    7    doz.    cans 

peaches  at  $1.75  per  doz.;  2,000  lbs.  bran  at  $16.25  per  1,000  lbs. 
Bought  from  the  Perfection  Creamery,  Rosedale,  on  twenty  days'  time, 

merchandise,  $34.45. 
Received  $30.00  from  M.  J.  Sanders  to  apply  on  account. 
Bought  from  Chafin  &  Jones,  City,  for  cash,  merchandise,  $116.60. 
Sold  W.  W.  Johnston,  122 1  Elm  St.,  on  account,  2,000  lbs.  bran  at  $16.25 

per  1,000  lbs.;   200  lbs.  lard  at  22c;   3  doz.  cans  peaches  at  $1.60  per 

doz.  cans. 
Paid  Winters  &  Gay  $104.05,  balance  due  on  merchandise  purchased 

on  the  3d. 
Received  $52.50  for  sundry  cash  sales  to  date. 
Sold  W.  W.  Johnston,   122 1   Elm  St.,  on  account,   100  lbs.  granulated 

sugar  at  7c;    10  bbls.  White  Rose  flour  at  $9.75. 
Bought  from  the  Perfection  Creamery,  Rosedale,  on  twenty  days'  time, 

merchandise,  $167.55. 

Received  $50.00  from  the  Colonial  Hotel  in  full  for  balance  due  on 
merchandise  sold  them  on  the  8th,  and  on  account  of  that  sold  on  the 
i6th. 

Paid  Winters  &  Gay  $200.00  on  account  of  merchandise  purchased  on 
the  loth. 

Received  $10.55  from  J.  A.  Taylor  in  pa\ment  for  balance  due  on  mer- 
chandise sold  him  on  the  5th. 

Sold  L.  S.  Lynn,  915  Jefi'erson  Ave.,  on  account,  5  bbls.  White  Rose  flour 
at  $9.75;    10  lbs.  creamery  butter  at  42c. 

Received  $40.00  from  L.  S.  Lynn  to  apply  on  account. 
Paid  Woodward  Bros.  $200.00  on  account  of  merchandise  purchased  on 
the  15th. 

31.     Paid  bookkeeper's  salary,  $60.00;  rent,  $50.00;  telephone  service,  $10.00. 

When  the  above  transactions  have  been  recorded  in  the  journal  as  instructed, 
open  accounts  in  the  ledger  with  Cash  (13),  J.  A.  Tavlor  (6),  Colonial  Hotel  (8), 
M.  J.  Sanders  (5),  W.  W.  Johnston  (6),  L.  S.  Lynn  (5),  W^oodward  Bros.  (6),  Win- 
ters &  Gay  (8),  Perfection  Creamery  (6),  E.  H.  Weatherby,  Capital  (5),  Sales  (13), 
Purchases  (12),  Expense  (6),  allowing  for  each  account  the  number  of  lines  indicated; 
post  the  transactions,  and  prove  the  posting   by   a   Trial    Balance   of   balances. 


24. 


26. 


29. 


42  RECORDING  TRANSACTIONS. 

QUESTIONS 

1 .  Name  some  of  the  necessary  expenses  of  a  grocery  business. 

2.  Can  you  suggest  a  plan  which  would  permit  the  grocer  to  know  the  cost  of 

delivering  merchandise? 

3.  What  accounts  are  affected  when  cash  is  paid  for  telephone  service? 

4.  What  effect  would  it  have  on  the  operating  cost  of  the  business  if  the  salary 

paid  the  owner  for  his  services  in  connection  with  the  business  were  charged 

to  his  Capital  account? 
Name  the  account  debited  and   the  account  credited  when  merchandise   is 

invested  at  the  beginning  of  business. 
What  accounts  are  affected  when  cash  and  merchandise  are  in\ested  at  the 

beginning  of  business? 
What  must  the  owner  of  a  business  take  into  consideration  when  he  fixes  the 

selling  price  of  the  merchandise  which  the  business  offers  for  sale? 

8.  Name  some  of  the  expenses  in  connection  with  the  operation  of  a  railroad. 

9.  If  a  farmer  shows  all  of  his  operating  cost  in  one  account,  name  some  of  the 

expenses  which  would  be  debited  to  this  account. 

10.  If  a  merchant  pays  $25.00  for  dra^^age  on  merchandise  he  has  purchased, 

would  this  be  debited  to  the  Expense  or  the  Purchases  account?  Cii\e 
reasons  for  your  answer. 

11.  What  accounts  are  affected  when  the  owner  withdraws  a  part  of  his  capital? 

12.  Name  the  account  debited  and  the  account  credited  when  the  owner  invests 

cash  in  the  business  at  a  time  other  than  the  beginning  of  the  business. 

13.  If  a  telephone  company  pays  $2,000.00  for  wire  used  in  connection  with  the 

service  rendered  its  customers,  will  this  be  debited  to  the  Expense  account? 

14.  If  a  railroad  company  pays  $8,000.00  for  a  new  engine,  will  this  be  debited  to 

the  Expense  account? 

15.  What  accounts  are  affected  when  stamps,  the  cost  of  which  is  charged  to  the 

Expense  account,  are  used  for  parcel  post  on  a  package  containing  merchan- 
dise sold  a  customer  on  account? 

16.  Name  the  account  debited  and  the  account  credited  if  the  sale  mentioned  in 

the  preceding  question  had  been  made  for  cash  and  the  customer  had  given 
the  business  cash  for  the  merchandise  and  stamps. 

17.  If  Robert  A.  Clark,  the  owner  of  a  business,  is  to  receive  a  salary  of  $200.00 

a  month  for  his  services  rendered  to  the  business  and  this  is  withdrawn  at 
different  times,  what  would  be  the  name  of  the  account  kept  with  the  trans- 
actions affecting  this  salary? 

18.  What  accounts  would  be  affected  when  the  entry  was  made  at  the  end  of  the 

month   for  the  $200.00  salary   (?33,   page  33?) 

19.  Name  the  account  debited  and  the  account  credited  if  Mr.  Clark  accepted 

merchandise  from  stock  at  cost  price  in  payment  for  a  part  of  his  salary. 

20.  What  accounts  would  be  affected  if  Mr.  Clark  accepted  merchandise  from 

stock  at  the  selling  price  in  payment  for  a  part  of  his  salary? 

21.  What  entry  would  be  required  if  one  customer  was  debited  with  merchandise 

purchased  by  another  customer? 

22.  Name  some  of  the  transactions  which  might  occur  in  connection  with  the 

complete  operations  of  a  hardware  business. 

23.  Name  some  of  the  transactions  which  might  occur  in  connection  with  the 

complete  operations  of  a  plumbing  business. 

24.  Under  what  circumstances  would  you  advise  the  keeping  of  more  than  one 

account  with  the  expenses  of  a  business? 

25.  Name  some  of  the  transactions  which  might  be  performed  in  connection  with 

the  operations  of  a  dair\'. 


Chapter  V 


RECORDING  TRANSACTIONS— Concluded 

§  37.  Special  Journals.  While  all  transactions  may  be  recorded  in  the 
journal  as  explained  in  §  22,  >et  it  is  not  customary  to  do  this  because  efficiency  in 
bookkeeping  means  the  greatest  amount  of  work  with  the  best  results  at  the  least 
cost.  When  a  number  of  transactions  affect  the  same  account,  much  time  can  be 
saved  by  recording  them  in  special  journals.  Fifty  purchases  during  one  month 
recorded  in  the  journal  would  require  writing  "Purchases"  fifty  times  and  posting 
fifty  separate  amounts  to  the  Purchases  account.  If  these  transactions  were  re- 
corded in  a  journal  and  no  other  transactions  were  recorded  in  this  journal,  it  would 
not  be  necessary  to  write  "Purchases"  in  each  transaction  and  the  total  could  be 
posted  to  the  Purchases  account  in  one  amount  at  the  end  of  the  month,  thus  sa\'ing 
practically  half  the  time  in  the  recording  and  posting  of  these  transactions. 

In  a  mercantile  business  the  transactions  which  are  of  the  most  frequent 
occurrence  are  those  in  connection  with  the  purchase  and  sale  of  merchandise  and 
the  receipt  and  payment  of  cash.  If  these  transactions  are  recorded  in  special 
journals,  the  work  in  the  accounting  department  will  be  much  more  efficient,  and, 
where  the  volume  of  business  is  large  and  more  than  one  bookkeeper  is  needed,  the 
several  bookkeepers  can  use  the  different  journals  without  interfering  with  the 
work  of  each  other. 

§  38.  The  Purchases  Journal  is  a  book  of  original  entry  in  which  all  pur- 
chases of  merchandise  are  recorded  and  no  other  transactions  are  recorded  in  it. 
The  complete  record  of  a  transaction  in  w^hich  merchandise  is  purchased  includes 
the  date  of  entry,  the  name  and  address  of  the  person  or  firm  from  whom  the  mer- 
chandise is  purchased,  the  terms,  the  items  purchased,  and  the  amount  of  the  pur- 
chase. The  ruling  in  the  purchases  journal  should  be  so  arranged  that  all  this 
information  can  be  recorded  on  one  line.  When  arranged  in  this  manner,  each 
person  or  firm  from  whom  merchandise  is  purchased  can  be  credited  in  his  account 
in  the  ledger,  and  the  Purchases  account  debited  for  the  total  at  the  end  of  the 
month.  One  form  of  the  purchases  journal  is  shown  in  Illustration  No.  17;  other 
forms  will  be  illustrated  and  explained  later. 

Transactions  in  which  cash  is  paid  for  merchandise  at  the  time  it  is  pur- 
chased may  be  entered  direct  in  the  cash  record,  or  may  be  entered  in  the  purcha.ses 
journal  in  the  same  manner  as  a  purchase  on  account  and  the  person  from  whom 
it  is  purchased  debited  with  the  cash  paid  in  the  cash  record.  There  is  no  es- 
tablished rule  in  regard  to  the  method  of  recording  these  transactions,  but  it  is 
customary  to  record  all  purchases  in  the  purchases  journal  except  the  miscellaneous 
items  that  may  be  purchased  for  cash  as  they  are  needed.  The  final  results  are  the 
same  whether  the  record  is  made  in  both  the  purchases  journal  and  cash  record  or 
in  the  cash  record  only. 

The  following  purchases  of  merchandise  made  by  E.  B.  Taylor,  a  retail  grocer, 
during  the  month  of  January,  are  shown  recorded  in  the  purchases  journal  in 
Illustration  No.  17: 

Jan.     2.     Bought  of  E.  C.  Cline,  Chicago,  on  account,  merchandise,  $77.30. 

3.     Bought   of   Langley   Bros.,    City,   on   thirty   days'    time,    merchandise. 

SI34-95- 
23.     Bought  of  Logan  &  Mosele}-,  Centerville,  on  twenty  days'  time,  mer- 


chandise, $228.60. 


43 


44     RECORDING  TRANSACTIONS  IN  THE  PURCHASES  JOURNAL. 


i/gZ-^7--Z,.i:yC'Ct--7*-^,    /  '^ 


•>-- 


Date 


L.F. 


Account  Credited 


^.AS^c:^.^ 


^^^>i^■^^^^Ce^  /^h''-7P^^. 


Address 


-V  j'-^^:-^^' 


Terms 


Pur. 
No. 


Amount 


j/^ors 


Illustration  No.  17,  Purchases  Journal. 
EXPLANATION.     Each  transaction  is  recorded  on  one  horizontal  line.     The  information 
in  the  "Pur.  No."  column  refers  to  the  list  of  merchandise  sent  by  the  seller  to  the  purchaser;   this 
list  is  filed  for  future  reference.     The  entire  record  in  this  purchases  journal  is  equivalent  to  one 
journal  entry  in  which  the  Purchases  account  is  debited  and  three  personal  accounts  credited. 

§  39.     Posting  from  the  Purchases  Journal.     Each  amount  entered  in 
the  money  column  is  posted  to  the  credit  of  the  account  written  on  the  same  line 

{Concluded  on  page  45.) 


CZ^   CjV  (_-i^:U.<?'z.,^^ 


C •^d.-^C'ez^-'a-'^^ 


Illustration  No.  18,  Ledger  Resulting  from  Posting  Illustration  No.  17. 
EXPLANATION.     A  Trial  Balance  from  this  ledger  will  show  that  the  debit  amount  is 
equal  to  the  credit  amounts  even  though  the  record  in  the  accounts  does  not  represent  all  of  the 
transactions  that  the  business  would  perform.     One  purpose  of  this  illustration  is  to  show  that  the 
ledger  is  in  balance  when  all  the  transactions  from  any  one  journal  have  been  posted. 


RECORDING  TRANSACTIONS  IN  THE  PURCHASES  JOURNAL.    45 

with  it.  The  date,  the  letter  "[*"  and  the  page  of  the  purchases  journal,  are  entered 
in  the  ledger  the  same  as  in  posting  from  another  journal  (§  24);  the  letter  "P" 
indicates  the  title  of  the  book  of  original  entry.  If  a  specific  time  of  payment  is 
stated,  this  should  be  written  in  the  explanation  column  of  the  ledger  as  explained 
under  Illustration  No.  i.  The  page  of  the  ledger  is  written  in  the  folio  column  of 
the  purchases  journal  to  indicate  that  the  transaction  has  been  posted.  The  Pur- 
chases account  is  not  debited  with  the  amount  of  each  purchase,  but  with  the  total 
purchases  at  the  end  of  the  month. 

The  posting  of  the  transactions  recorded  in  the  purchases  journal,  Illustration 
No.  17,  is  shown  in  Illustration  No.  18. 


Exercise  No.  15,  Recording  Transactions  in  the  Purchases  Journal. 

Record  in  the  purchases  journal  (paper  ruled  similar  to  Illustration  No.  17) 
the  following  transactions  relative  to  the  purchase  of  merchandise  during  the  month 
of  February  by  W.  O.  Gardner,  who  is  engaged  in  the  hardware  business: 

Feb     I.     B.  A.  Ames,  Toledo.  30  days,  Purchase  No.  i,  $350.00. 

5.     H.  M.  Lowe,  Nashville,  Feb.  3,  30  days.  Purchase  No.  2,  $325.00. 

In  this  purchase  the  merchandise  was  shipped  Feb.  3  and  received  Feb.  5;  the  amount  is 
due  30  days  from  Feb.  3. 

9.  H.  T.  Harris,  Rochester,  20  days,  Purchase  No.  3,  $486.00. 

12.  J.  T.  Goodrich,  City,  Feb.  10,  90  days.  Purchase  No.  4,  $825.00. 

18.  J.  P.  Benson,  Cleveland,  Feb.  17,  60  days.  Purchase  No.  5,  $64.00. 

23.  C.  O.  Parsons,  City,  30  days.  Purchase  No.  6,  $128.00. 

28.  H.  L.  Simpson,  Dayton,  Feb.  26,  30  days,  Purchase  No.  7,  $242.00. 

When  the  above  transactions  have  been  recorded  in  the  purchases  journal  as 
instructed,  and  the  purchases  journal  ruled  as  in  Illustration  No.  17,  open  accounts 
on  a  sheet  of  ledger  paper  with  Purchases  and  each  of  the  seven  creditors,  allowing 
four  lines  for  each  account.  When  the  posting  has  been  completed,  prove  the 
equality  of  the  debits  and  credits  by  a  Trial  Balance. 

Exercise  No.  16,  Recording  Transactions  in  the  Purchases  Journal. 

Record  in  the  purchases  journal  the  following  transactions  relative  to  the 
purchase  of  merchandise  during  the  month  of  January  by  W.  H.  Goodwin,  a  retail 
grocer : 

Jan.     2.  Brown  &  Co.,  Elmwood,  on  account,  Purchase  No.  i,  $77.30. 

3.  Knox  Bros.,  City,  on  account,  Purchase  No.  2,  $134.95. 

10.  Hazen  &  Lockhart,  Danville,  on  account.  Purchase  No.  3,  $228.60. 

15.  Brown  &  Co.,  Elmwood,  on  account.  Purchase  No.  4,  $226.00. 

17.  Lake  View  Creamery,  Lake  View,  Jan.   14,  20  days.  Purchase  No.  5, 

$28.00. 

23.  J.  Allen  Smith  &  Co.,  Rockford,  10  days,  Purchase  No.  6,  $197.10. 

27.  Donaldson  Bros.,  City,  Jan.  24,  account,  Purchase  No.  7,  $172.75. 

When  the  above  transactions  have  been  recorded  in  the  purchases  journal  as 
instructed,  and  the  purchases  journal  ruled,  open  accounts  on  a  sheet  of"  ledger 
paper  with  Purchases  and  each  of  the  six  creditors,  allowing  five  lines  for  Brown 
&  Co.  and  four  lines  for  each  of  the  other  accounts.  When  the  posting  has  been 
completed,  prove  the  equality  of  the  debits  and  credits  by  a  Trial  Balance. 

After  the  instructor  has  approved  this  exercise,  retain  the  purchases  journal 
for  use  in  connection  with  Exercise  No.  22. 


46  RECORDING  TRANSACTIONS  L\  THE  SALES  JOURNAL. 

Exercise  No.  17,  Recording  Transactions  in  the  Purchases  Journal. 

Record  in  the  purchases  journal  the  following  transactions  relative  to  the 
purchase  of  merchandise  during  the  month  of  March  by  C.  U.  Steele,  a  retail  shoe 
dealer: 

March     2.     Bay  State  Shoe  Co.,  Boston,  Feb.  28,  10  days.  Purchase  No.  i,  $496.81. 
V     Havnes,  Henson  &  Co.,  Newark,  N.  J.,  Mar.  2,  10  days,  Purchase  No. 

2,  $387-65- 
4.     M.  B.  Lang,  City,  Mar.  3,  30  days,  Purchase  No.  3,  $1,691.42. 
6.     Cline  Shoe  Co.,  Pittsburgh,  Mar.  4,  30  days.  Purchase  No.  4,  $168.42. 
18.     Bay  State  Shoe  Co.,  Boston,  Mar.  15,  30  days,  Purchase  No.  5,  $987.35. 

25.  Haynes,  Henson  &  Co.,  Newark,  N.  J.,  Mar.  20,  30  days,  Purchase 

No.  6,  $462.85. 

26.  Cline  Shoe  Co.,  Pittsburgh,  Mar.  20,  30  days.  Purchase  No.  7,  $785.00. 
31.     A.  O.  Haines,  Albany,  Mar.  21,  60  days.  Purchase  No.  8,  $432.50; 

M.  B.  Lang,  City,  Mar.  22,  30  days.  Purchase  No.  9,  $356.00. 

When  the  above  transactions  have  been  recorded  in  the  purchases  journal  as 
instructed,  and  the  purchases  journal  ruled,  open  an  account  with  Purchases  at 
the  top  of  page  i  of  a  double  sheet  of  ledger  paper,  and  an  account  with  each  of 
the  five  creditors  on  page  2  of  the  same  sheet,  allowing  equal  space  for  each  personal 
account;    prove  the  equality  of  the  debits  and  credits  by  a  Trial  Balance. 

If  double  ledger  paper  ruled  with  from  thirty  to  forty  horizontal  lines  on  each  page  can  nor 
be  obtained,   use  any  ledger  paper  available  and  allow  five  lines  for  each  account. 

After  the  instructor  has  approved  this  exercise,  retain  the  ledger  sheet  for  use 
i  n  Exercises  Nos.  20  and  23. 

§  40.  The  Sales  Journal  is  a  book  of  original  entry  in  which  all  sales  of 
merchandise  on  account  are  recorded  and  no  other  transactions  are  recorded  in  it. 
The  complete  record  of  a  transaction  in  which  merchandise  is  sold  on  account 
includes  the  date  of  the  sale,  the  name  and  address  of  the  person  or  firm  to  whom 
the  merchandise  is  sold,  the  terms,  the  items  sold,  and  the  amount  of  the  sale.  If 
the  seller  does  not  retain  a  copy  of  the  items  sold,  the  ruling  in  the  sales  journal 
should  be  so  arranged  that  these  items  may  be  recorded  in  connection  with  the 
other  information  in  regard  to  the  transaction.  If  the  seller  does  retain  a  list  of 
the  items  sold,  this  can  be  numbered  and  filed  for  reference  and  the  number  re- 
corded in  the  sales  journal.  It  is  necessary  for  the  seller  to  retain  a  record  of  the 
items  sold  a  customer  on  account  because  this  information  will  be  needed  in  case 
adjustments  are  required.  If  a  customer  returns  items  which  he  claims  were 
purchased  from  the  seller  and  the  seller  had  no  record  of  the  items  sold  to  this  cus- 
tomer, he  might  be  imposed  upon  by  allowing  credit  for  merchandise  which  was 
not  {)urchased  from  him. 

Illustration  No.  19  shows  the  form  of  sales  journal  with  the  items  recorded  in 
it,  and  Illustration  No.  20  the  same  items  recorded  in  a  sales  journal  wnth  the  items 
indicated  by  the  sale  number.  The  method  shown  in  Illustration  No.  20  is  more 
efficient  because  it  requires  less  time  to  record  a  number  than  it  does  a  list  of 
articles  sold.  The  other  form  is  shown  because  it  is  used  by  some  business  concerns. 
No  matter  which  method  of  recording  sales  is  used,  the  arrangement  of  the  sales 
journal  should  be  such  that  the  account  with  each  customer  may  be  debited  with 
the  amount  of  his  purchase  and  the  Sales  account  credited  at  the  end  of  the 
month  with  the  total  sales. 

Cash  sales  are  not  recorded  in  the  sales  journal,  but  the  total  cash  sales  for 
each  day  are  entered  in  the  cash  record.  The  nature  of  cash  sales  is  different  from 
that  of  cash  purchases  in  that  it  is  customar>-  for  the  customer  to  pay  cash  for  the 


RECORDING  TRANSACTIONS  IN  THE  SALES  JOURNAL. 


47 


merchandise  he  purchases  and  either  take  it  with  him  or  have  it  delivered.  On  the 
other  hand,  the  owner  of  a  business  usually  orders  his  merchandise  in  advance  and 
records  the  purchase  when  it  is  received  and  pays  for  it  according  to  the  terms.  In 
a  business  where  only  occasional  cash  sales  are  made,  these  may  be  recorded  in  the 
sales  journal.  The  nature  of  the  business  and  desires  of  the  management  will 
determine  the  practice  to  be  followed  in  recording  cash  sales. 

The  following  sales  made  by  E.  B.  Taylor,  a  retail  grocer,  during  the  month 
of  January,  are  shown  recorded  in  the  sales  journal  in  Illustrations  Nos.  19  and  20. 
Jan.  6.  Sold  A.  R.  Manley,  106  Elm  St.,  City,  on  account,  40  lbs.  Arbuckle  coffee 
at  20c;  I  bbl.  White  Lily  flour,  $6.25. 
Sold  Gibson  Hotel,  12  E.  4th  St.,  City,  on  ten  days'  time,  6  bbls.  Roller 
King  flour  at  $5.10;  3  bbls.  White  Lily  flour  at  $6.25;  40  lbs.  Ar- 
buckle coft'ee  at  20c. 
Sold  T.  L.  Staples,  Clinton,  on  sixty  days'  time,  4  bbls.  Roller  King  flour 

at  $5.10;  4  cans,  200  lbs.,  lard  at  15c. 
Sold  A.  R.  Manley,  106  Elm  St.,  City,  on  account,  5  bbls.  White  Lily 
flour  at  $6.25;    115  lbs.  Arbuckle  coffee  at  20c. 


16. 


17- 


26. 


/f_ 


^,  /f> 


(^^^a.<>^^         /^/  T^y^i^.  d^^ 


.2-.^ 


/  . 


■r-f-p^iy. 


^4^z^    /^^.^^i^  (3^ 


6> ^//t^.^^^^^'^^^J^*^^^ :^:/tr'i.c^  sj-./o 


^^  /-/ — 


^^--t^^.V^^^'T^/i;^^^^^:^:^^^^^^^^^    ^/<^ 


3\o 


/jI^Z<L 


6>o 


7-0 


^a 


'J-\-  3  0 


>2-^ 


-^ 


SKS 


o,  ^ 


I    I 

I     ! 


^,0 


JAt-J 


^^^^' 


Jlj.. 


/  7  6 


z^zAiA^^. 


Illustration  No.  19,  Sales  Journal  with  Items  Sold  Recorded  in  It. 

EXPLANATION.  Each  transaction  recorded  shows  the  date,  the  name  and  address  of  the 
customer,  the  total  amount  of  the  sale,  and  the  items  sold;  if  the  terms  are  to  be  indicated,  they 
should  be  written  on  the  line  with  the  name  of  the  account  or  the  line  below.  The  amount  of  each 
sale  is  written  on  the  same  line  with  the  name  of  the  customer  to  facilitate  posting. 


48  RECORDING  TRANSACTIONS  IN  THE  SALES  JOURNAL. 


Account  Debited 


S<l» 
Wn. 


-lA- 


j- 


»^^,^j^^li^ 


'7- 


jL 


-^^,/ 

..U- 


^^fe 


Illustration  No.  20,  Form  of  Sales  Journal  when  a  Copy  of  Items  Sold  is  Retained. 

EXPLANATION.  All  the  information  in  regard  to  each  transaction  is  recorded  on  one  line 
the  same  as  a  transaction  recorded  in  the  purchases  journal.  The  copy  of  the  items  in  each  sale  is 
numbered  and  filed  for  future  reference.  The  record  in  thig  illustration  is  equivalent  to  a  journal 
entry  in  which  three  personal  accounts  are  debited  and  the  Sales  account  credited  for  the  total. 

§  41.  Posting  from  the  Sales  Journal.  Each  amount  entered  in  the 
money  column  is  posted  to  the  debit  of  the  account  written  on  the  same  line  with 
it.     The  date,  the  letter  "S"  and  the  page  of  the  sales  journal  are  entered  in  the 

{Continued  on  page  4Q.) 


r  ^ 


^  ^2^Z..:z.^2^^ 


C  ^^U^.^^C^:^ 


./  ^ 


j-^ 


Illustration   No.   21,   Ledger  Resulting  from  Posting  Illustration  No.  19  or  No.  20. 
EXPLANATION.     The  same  explanation  applies  here  as  that  given  in  connection  with  the 
ledger  resulting  from  posting  the  transactions  from  the  purchases  journal,  Illustration  No.   18. 


RECORDING  TRANSACTIONS  IN  THE  SALES  JOURNAL. 


49 


12 

H 

i8 

20 


-'/ 


ledger  the  same  as  in  posting  from  another  journal;  the  letter  "S"  indicates  the 
title  of  the  book  of  original  entry.  If  a  speqific  time  of  pa}'ment  is  stated,  this 
should  be  written  in  the  explanation  column  of  the  ledger  as  explained  under 
Illustration  No.  i.  The  page  of  the  ledger  is  written  in  the  folio  column  of  the 
sales  journal  to  indicate  that  the  transaction  has  been  posted.  The  Sales  account 
is  not  credited  with  the  amount  of  each  sale,  but  with  the  total  sales  at  the  end  of 
the  month. 

The  posting  of  the  transactions  recorded  in  the  sales  journal,  Illustration  No. 
19  or  No.  20,  is  shown  in  Illustration  No.  21. 

Exercise  No.  18,  Recording  Transactions  in  the  Sales  Journal. 

Record  in  the  sales  journal  (paper  ruled  similiar  to  Illustration  No.  20)  the 
following  transactions  relative  to  the  sale  of  merchandise  on  account  during  the 
month  of  February  by  W.  J.  Wheeler,  a  retail  merchant: 
Feb.     3.     E.  M.  Miller,  507  Gay  St.,  Sale  No.  i.  $25.50. 

William  A.  Wallace,  Evanston,  Sale  No.  2,  $14.50. 

B.  T.  Hart  &  Co.,  Maryville,  Sale  No.  3,  $32.50. 

D.  T.  Sinton,  Uniontown,  Sale  No.  4,  $41.65. 

G.  L.  Frye,  29  Main  St.,  Sale  No.  5,  $12.75. 

The  Long  Construction  Co.,  Uniontown,  30  days,  Sale  No.  6,  $142.50. 

Henry  Mason,  64  Union  St.,  Sale  No.  7,  $21.55. 

D.  P.  Lewis,  310  Chestnut  St.,  Sale  No.  8,  $9.75. 

Maynard  Pritchett,  Brookville,  30  days,  Sale  No.  9,  $65.25. 
When  the  above  transactions  have  been  recorded  in  the  sales  journal  as  in- 
structed, and  the  sales  journal  ruled  as  in  Illustration  No.  20,  open  accounts  on  a 
sheet  of  ledger  paper  with  Sales  and  each  of  the  nine  customers,  allowing  four 
lines  for  each.     When  the  posting  has  been  completed,  take  a  Trial  Balance. 

Exercise  No.  19,  Recording  Transactions  in  the  Sales  Journal. 

Record  in  the  sales  journal  (journal  paper  ruled  similar  to  Illustration  No.  19) 
the  following  transactions  relative  to  the  sale  of  merchandise  during  the  month  of 
January  by  W.  H.  Goodwin,  a  retail  grocer: 

Jan.     4.     A.  R.  Jennings,   105  Main  St.,  20  lbs.  roasted  coffee  at  33c;    100  lbs. 
granulated  sugar  at  7c;   50  lbs.  bacon  at  23c. 
8.     Central  Hotel,  22  Walnut  St.,  5  bbls.  Blue  Ribbon  flour  at  $9.25 ;  4  hams, 

100  lbs.,  at  26c;    100  lbs.  granulated  sugar  at  7c. 
II.     A.  R.  Jennings,  105  Main  St.,  i  doz.  cans  tomatoes,  $2.00;   4  cans,  216 

lbs.,  lard  at  26c. 
13.     M.  A.  Johnson,  Kingston,  5  bbls.  White  Rose  flour  at  $9-75;  6  hams,  141 

lbs.,  at  26c. 
16.     Imperial  Hotel,  200  Locust  St.,  5  bbls.  Blue  Ribbon  flour  at  $9.25;    100 

lbs.  granulated  sugar  at  7c. 
19.     A.  C.  Williams,  1221  Elm  St.,  12  doz.  cans  peaches  at  $1.80  per  doz.; 

2,000  lbs.  bran  at  $16.25  per  1,000  lbs. 
22.     R.  G.  Mathews,  25  E.  Fourth  St.,  10  bu.  meal  at  $1.10;   5  bu.  beans  at 
$3.20;    3  doz.  cans  peaches  at  $1.80  per  doz. 

25.  Imperial  Hotel,  200  Locust  St.,  5  bbls.  White  Rose  flour  at  $9.75;    25 

lbs.  creamery  butter  at  41c. 

26.  J.  C.  Wilson,  270  Central  Ave.,  2,000  lbs.  bran  at  $16.25  per  1,000  lbs.; 

5  cans,  248  lbs.,  lard  at  26c. 

27.  C.  L.  Loyd,  1604  Vine  St.,  100  lbs.  brown  sugar  at  63^c;    100  lbs.  gran- 

ulated sugar  at  7c;   5  bbls.  White  Rose  flour  at  $9.75. 
When  the  above  transactions  have  been  recorded  in  the  sales  journal  as  in- 
structed, and  the  sales  journal  ruled  as  in  Illustration  No.  19,  open  accounts  on  a 


50 


RECORDING  TRANSACTIONS  IN  THE  SALES  JOURNAL. 


sheet  of  ledger  paper  wiih  Sales  and  each  of  the  eight  customers,  allowing  five 
lines  each  for  A.  R.  Jennings  and  Imperial  Hotel  and  four  lines  for  each  of  the 
other  accounts.     When  the  posting  has  been  completed,  take  a  Trial  Balance. 

After  the  instructor  has  approved  this  exercise,  retain  the  sales  journal   for 
use  in  connection  with  Exercise  No.  22. 


Exercise  No.  20,  Recording  Transactions  in  the  Sales  Journal. 

Record  in  the  sales  journal  (journal  paper  ruled  similar  to  Illustration  No.  19) 
the  following  transactions  relative  to  the  sale  of  merchandise  during  the  month  of 
March  by  C.  U.  Steele,  a  retail  shoe  dealer: 

March     i.     R.  L.  Watson,  207  Mason  St.,  i  pr.  Queen  City  shoes,  $10.50. 
4.     C.  A.  Sheppard,  Canton,  3  prs.  Ladies'  shoes  at  $4.00. 
9.     J.  C.  Wilson  &  Co.,  Hamilton,  8  prs.  Men's  Calf  shoes  at  $2.50;    14 

prs.  Men's  Jefferson  shoes  at  $3.75. 
12.     A.  R.  King,  Boston,  i  pr.  Ladies'  Bal.  at  $4.50. 
15.     W.  E.  Peters,  Clinton,  i  pr.  Men's  V'ici  Autocrat  shoes,  $14.00. 
18.     W^  K.  Love,  207  Main  St.,  i  pr.  Men's  Vici  Kid  shoes,  $11.50. 
21.     A.  R.  King,  Boston,  2  prs.  Women's  Box  Calf  at  $4.00. 
26.     C.  A.  Sheppard,  Canton,  i  pr.  Men's  Cong.  Calf,  $9.00. 
30.     R.  L.  Watson,  207  Mason  St.,  6  prs.  Children's  Satin  Calf  at  $2.75. 
When  the  above  transactions  have  been  recorded  in  the  sales  journal  as  in- 
structed, and  the  sales  journal  ruled  as  in  Illustration  No.  19,  open  an  account 
with  Sales  eight  lines  from  the  top  of  page  i  of  the  double  sheet  of  ledger  paper  used 
in  Exercise  No.  17;   open  an  account  with  each  of  the  six  customers  on  page  3  of 
this  same  ledger  sheet,  allowing  equal  space  for  each  personal  account;    take  a 
Trial  Balance.    When  approved,  retain  the  ledger  sheet  for  use  in  Exercise  No.  23. 

§42.  The  Cash  Record.  There  are  two  classes  of  cash  transactions:  those 
in  which  cash  is  received,  and  those  in  which  cash  is  paid.  These  transactions  ma>- 
be  recorded  in  two  separate  journals,  the  receipts  in  a  cash  receipts  journal  and  the 

(Concluded  on  page  57.) 


a 


(?^r^uJ^ 


/fek.a.^^l^^^ZS' 


Illustration  No.  22,  Receipts  Side  of  Cash  Book. 

EXPLANATION.  The  transactions  recorded  on  the  receipts  side  of  the  cash  book  in  the 
illustration  are  equivalent  to  a  journal  entry  in  which  the  Cash  account  is  debited  for  the  total, 
and  each  of  the  four  accounts  credited  for  the  amount  written  on  the  same  line  with  it.  The  ruling 
separates  the  cash  receipts  for  two  different  months;  the  balance  at  the  beginning  of  the  month 
is  carried  down  below  the  ruling  because  it  will  be  needed  in  subsequent  proving  of  cash. 


RECORDING  TRANSACTIONS  IN  THE  CASH  BOOK. 


51 


{Continued  from  page  50.) 

pa\"ments  in  a  cash  payments  journal,  or  they  may  be  recorded  in  a  cash  Ijook 
which  is  a  combination  of  the  two  journals.  When  one  bookkeeper  records  all  the 
transactions  with  cash  received  and  paid,  it  is  better  to  use  the  cash  book;  when 
the  recording  of  cash  transactions  requires  more  than  one  bookkeeper,  it  is  better 
to  use  separate  cash  receipts  and  cash  payments  journals. 

§  43.  The  Cash  Book  is  a  book  of  original  entry  in  which  all  receipts  and 
payments  of  cash  are  recorded  and  no  other  transactions  are  recorded  in  it.  Receipts 
and  pa\-ments  are  usually  recorded  on  separate  pages  opposite  each  other,  receipts 
on  the  left  and  payments  on  the  right.  The  complete  record  of  a  transaction  in 
which  cash  is  received  or  paid  consists  of  the  date,  the  name  of  the  account  affected, 
explanation,  and  the  amount  received  or  paid.  The  ruling  in  the  cash  book  should 
be  so  arranged  that  all  this  information  can  be  recorded  on  one  line.  When  ar- 
ranged in  this  manner,  each  account  affected  by  a  cash  receipt  can  be  credited 
for  the  amount  and  the  Cash  account  debited  for  the  total  at  the  end  of  the  month ; 
each  account  affected  by  a  cash  payment  can  be  debited  for  the  amount  and  the 
Cash  account  credited  for  the  total  at  the  end  of  the  month.  One  form  of  the 
cash  book  is  shown  in  Illustrations  Nos.  22  and  23:  other  forms  will  be  illustrated 
and  explained  later.  \» 

The  following  receipts  and  payments  of  cash  made  during  the  month  of  Jan- 
uary by  E.  B.  Taylor,  a  retail  grocer,  are  shown  recorded  in  the  cash  book  in  Illus- 
trations Nos.  22  and  23: 


Jan. 


I 

4 
10 
12 

13 
20 

27 
30 


E.  B.  Taylor  invested  $1,000.00  in  the  retail  grocery  business. 

Paid  $20.00,  city  and  state  license  for  one  year. 

Paid  J.  F.  Sherwood  $192.00  for  a  cash  purchase  of  merchandise. 

Received  $30.50  for  sundry  cash  sales. 

Paid  E.  C.  Cline  $77.30  in  full  of  account. 

Received  $10.00  from  A.  R.  Manley  to  apply  on  account. 

Received  $30.50  from  the  Gibson  Hotel  to  apply  on  account. 

Recei\'ed  $41.85  for  sundry  cash  sales. 


z3 


Udyyty. 

V 

/ 

/^ 

/ 

/J 

/ 

3/ 

/ 

- 

-3/ 

— 

— 

^J. 


'..^U^ 


'—^^^  £i^^z^^i^e^.^c-c^ 


7r  3  y 


z.  r  ■<7  \3  o 


Zjr^  j: 


f 


/  /  /  Z\f  6 


Illustration  No.  23,  Payments  Side  of  Cash  Book. 

EXPLANATION.  The  transactions  recorded  on  this  side  of  the  cash  book  are  equivalent 
to  a  journal  entry  in  which  three  accounts  are  debited,  each  for  the  amount  written  on  the  same 
line  with  it,  and  the  Cash  account  credited  for  the  total.  The  balance  is  entered  in  red  ink  because 
it  is  customary  to  use  red  ink  when  an  amount  is  entered  in  a  book  of  account  or  a  ledger  account  in 
order  to  make  the  two  sides  equal.    The  ruling  separates  the  cash  payments  for  two  different  months. 


52 


RECORDING  TRANSACTIONS  IN    TIIH  CASH  BOOK. 


r    i¥ 


~£    7^.^^^^.^.^   ^2^^.:-2Sz^ 


Illustration  No.  24,  Ledger  Resulting  from  Posting  Illustrations  Nos.  22  and  23. 

EXPLANATION.  This  illustration  is  given  to  show  that  the  ledger  is  in  balance  when  all 
the  transactions  recorded  in  the  cash  book  have  been  posted,  and  not  to  show  the  true  meaning  of 
the  accounts.  Accounts  resulting  from  the  posting  of  transactions  recorded  in  the  cash  book  only 
will  not  show  their  true  meaning  because  of  the  connection  between  the  record  in  the  cash  book 
and  that  in  the  purchases  and  sales  journals.  If  desired,  the  posting  from  the  receipts  side,  the  pay- 
ments side,  and  both  sides  of  the  cash  book  may  each  be  proved  by  a  separate  Trial  Balance. 


RECORDING  TRANSACTIONS  IN  THE  CASH  BOOK.  53 

§  44.  Proving  Cash.  The  difference  between  the  two  sides  of  the  cash 
book  should,  at  all  times,  equal  the  amount  of  cash  belonging  to  the  business. 
When  all  cash  transactions  are  recorded  in  the  journal,  it  is  necessary  to  post  these 
to  the  Cash  account  before  proving  cash;  when  the  cash  transactions  are  entered 
in  the  cash  book,  the  proof  can  be  made  before  posting.  At  the  time  of  proving, 
the  total  receipts  and  total  payments  are  entered  in  small  pencil  figures  as  in  Illus- 
trations Nos.  22  and  23. 

After  cash  is  proved  at  the  close  of  a  month,  it  is  customary  to  enter  the  bal- 
ance in  red  ink  on  the  paj^ments  side,  rule  the  cash  book,  and  carry  the  balance 
down  on  the  receipts  side  below  the  ruling  as  in  the  illustrations.  The  balance 
carried  down  on  the  receipts  side  is  entered  in  the  second  money  column;  otherwise 
it  would  be  included  with  the  total  receipts  for  the  month  and  again  posted  to  the 
Cash  account  when  the  total  is  posted.  If  the  ruling  in  the  cash  book  does  not 
provide  a  column  in  which  to  enter  this  balance  and  it  is  entered  in  the  column 
with  receipts  for  the  month,  the  amount  of  the  balance  must  be  subtracted  from  the 
total  of  the  receipts  side  before  posting  the  total  receipts  at  the  close  of  the  month. 

When  ruling  the  cash  book,  it  is  customary  to  draw  the  double  red  lines  on  the  same  blue  line 
on  each  side  of  the  cash  book  even  though  the  number  of  entries  on  one  side  may  be  greater  than 
that  on  the  other  side. 

§  45.  Posting  from  the  Cash  Book.  Each  amount  in  the  money  column  on 
the  receipts  side  is  posted  to  the  credit  of  the  account  written  on  the  same  line 
with  it;  each  amount  in  the  money  column  on  the  payments  side  is  posted  to  the 
debit  of  the  account  written  on  the  same  line  with  it;  the  total  of  the  money  column 
on  the  receipts  side  is  posted  to  the  debit  of  the  Cash  account  at  the  end  of  the 
month,  and  the  total  of  the  money  column  on  the  payments  side  is  posted  to  the 
credit  of  the  Cash  account  at  the  end  of  the  month.  The  date,  the  letter  "C"  and 
the  page  of  the  cash  book  are  entered  in  the  ledger  in  the  same  manner  as  when 
posting  from  another  journal;  the  letter  "C"  indicates  the  title  of  the  book  of 
original  entry.  The  page  of  the  ledger  is  written  in  the  folio  column  of  the  cash 
book  to  indicate  that  the  entries  have  been  posted. 

The  posting  of  the  transactions  recorded  in  the  cash  book,  Illustrations  Nos. 
22  and  23,  is  shown  in  Illustration  No.  24. 

Exercise  No.  21,  Recording  Transactions  in  the  Cash  Book. 

Record  in  the  cash  book  (the  two  inside  pages  of  a  double  sheet  of  journal 
paper*  ruled  similar  to  Illustrations  Nos.  22  and  23),  receipts  on  the  left  and  pay- 
ments on  the  right,  the  following  cash  transactions  performed  during  the  month  of 
February: 
Feb.      I.     Student  invested  $1,276.80  in  the  retail  grocery  business. 

2.  Received  $150.00  from  E.  H.  Whfte  to  apply  on  account. 

3.  Paid  office  rent  for  the  month  of  February,  $40.00. 

4.  Received  $80.00  for  cash  sales. 

Paid  H.  R.  Swanson  $60.00  to  apply  on  account. 
6.     Received  $120.00  for  cash  sales. 

8.  Paid  A.  B.  Hill  $90.50  to  apply  on  account. 

9.  Received  $90.00  from  J.  K.  Lachman  in  payment  for  merchandise  sold 

him  on  the  4th. 

10.  Paid  drayage  on  merchandise  purchased,  $22.50. 

11.  Paid  J.  G.  Pipkin  $124.00  to  apply  on  account. 
14.     Received  $69.75  for  cash  sales. 

16.     Received  $170.00  from  P.  B.  S.  Peters  in  payment  for  merchandise  sold 
him  on  the  loth. 

{Concluded  on  page  54.) 

*If  double  journal  paper  with  from  thirty  to  forty  lines  on  each  page  is  not  available, 
cash  receipts  should  be  recorded  on  one  sheet  of  paper  and  payments  on  another,  as  the  proper 
ruling  of  the  cash  book  cannot  be  shown  when  receipts  are  entered  on  one  side  and  payments  on 
the  other  side  of  the  same  sheet. 


54 


RECORDING  TRANSACTIONS  IN  THE  CASH  BOOK. 


i8. 

20. 
22. 

23- 
24. 

25- 


28. 


{Exercise  No.  21 — Continued  from  page  jj.) 

Paid  $45.00  for  office  supplies. 
Paid  J.  T.  Ludlow  $146.00  to  apply  on  account. 
Purchased  merchandise  for  cash  from  H.  P.  King,  $128.00. 
Received  $47.85  for  cash  sales. 

Received  $210.00  from  H.  M.  Lovert  to  apply  on  account. 
Paid  salesman's  exf^enses,  $76.00. 
Received  $52.50  for  cash  sales. 
Paid  $32.80  for  freight  on  merchandise  purchased. 
Paid  clerk  hire,  $40.00. 
Paid  for  advertising,  $22.50. 
Cash  balance,  $1,439.60. 


When  the  above  transactions  have  been  recorded  in  the  cash  book  as  instructed, 
prove  cash  and  rule  the  cash  book  as  in  Illustrations  Nos.  22  and  23.  Open  ac- 
counts on  a  sheet  of  ledger  paper  with  Student,  Capital  (5),  Cash  (8),  Purchases  (7), 
Sales  (9),  Expense  (9),  E.  H.  White  (5),  J.  K.  Lachman  (5),  P.  B.  S.  Peters  (5),  H.  M. 
Lovert  (5),  H.  R.  Swanson  (5),  A.  B.  Hill  (5),  J.  G.  Pipkin  (5),  J.  T.  Ludlow^  (5), 
allowing  for  each  account  the  number  of  lines  indicated.  Post  the  transactions, 
and  prove  the  equality  of  the  debits  and  credits  by  a  Trial  Balance  of  balances. 


Exercise  No.  22,  Recording  Transactions  in  the  Cash  Book. 

Record  in  the  cash  book,  receipts  on  the  left  and  payments  on  the  right,  the 
following  cash  transactions  performed  during  the  month  of  January  by  W.  H. 
Goodwin,  a  retail  grocer: 


Jan. 


I 
4 

5 
6 

9 
12 

13 

18 
20 


26 
27 
29 
30 
31 


W.  H.  Goodwin  invested  $2,000.00  in  the  retail  grocery  business. 
Paid  $20.00  for  city  license. 

Paid  City  Milling  Co.  $192.00  for  a  cash  purchase. 
Received  $30.00  for  sundry  cash  sales. 
Paid  Brown  &  Co.  $77.30  in  full  of  account. 
Received  $10.00  from  A.  R.  Jennings  to  apply  on  account. 
Received  $30.00  from  Central  Hotel  to  apply  on  account. 
Received  $40.00  for  sundry  cash  sales. 
Paid  Knox  Bros.  $100.00  to  apply  on  account. 
Received  $35.00  from  M.  A.  Johnson  to  apply  on  account. 
Paid  Knox  Bros.  $34.95  in  full  of  account. 
Received  $50.00  for  sundry  cash  sales. 
Received  $15.00  from  Central  Hotel  to  apply  on  account. 
Paid  Hazen  &  Lockhart  $125.00  to  apply  on  account. 
Received  $15.10  from  A.  R.  Jennings  to  apply  on  account. 
Received  $42.50  for  sundry  cash  sales. 
Received  $50.00  from  C.  L.  Loyd  to  apply  on  account. 
Paid  Brown  &  Co.  $150.00  to  apply  on  account. 
Paid  bookkeeper's  salary,  $35.00;   rent,  $25.00. 
Cash  balance,  $1,558.35. 


When  the  above  transactions  have  been  recorded  in  the  cash  book  as  instructed, 
prove  cash  and  rule  the  cash  book;  then  proceed  as  follows: 

I.  Open  accounts  on  ledger  paper  with  W.  H.  Goodwin,  Capital  (4),  Cash 
(4),  Purchases  (4),  Sales  (6),  Expense  (4),  A.  R.  Jennings  (4),  Central  Hotel  (4), 
M.  A.  Johnson  (4),  C.  L.  Loyd  (4),  Brown  &  Co.  (4),  Knox  Bros.  (4),  Hazen  & 
Lockhart  (4),  allowing  for  each  account  the  space  indicated;  post  the  transactions, 
and  prove  the  equalit\'  of  the  debits  and  credits  by  a  Trial  Balance  of  balances. 

{Concluded  on  page  55.) 


RECORDING  TRANSACTIONS  IN  THE  CASH  BOOK. 


55 


{Exercise  No.  22 — Continued  from  page  54.) 

2.  Alter  the  instructor  has  approved  the  work  required  in  the  first  para- 
graph, post  to  a  sheet  of  ledger  paper  the  transactions  in  the  purchases  journal  for 
Exercise  No.  16  and  the  sales  journal  for  Exercise  No.  19,  which  you  were  instruct- 
ed to  retain,  and  the  cash  book  in  this  exercise.  Arrange  the  accounts  as  follows: 
Cash  (6),  customers  (each  4  lines),  creditors  (each  4  lines),  W.  H.  Goodwin.  Capital 
(5),  Sales  (7),  Purchases  (4),  Expense  (4),  allowing  for  each  the  number  of  lines 
indicated;    take  a  Trial  Balance  of  balances  from  this  ledger. 

The  purpose  of  the  second  division  of  this  exercise  is  to  show  that  the  ledger  is 
in  balance  when  all  the  transactions  from  all  the  special  journals  have  been  posted, 
the  same  as  it  is  when  all  the  transactions  from  each  special  journal  have  been 
posted. 

Present  the  purchases  journal,  sales  journals,  cash  book,  ledger  resulting  from 
posting  the  transactions  from  the  three  books,  and  Trial  Balance  to  the  instructor 
for  approval. 


Exercise  No.  23,  Recording  Transactions  in  the  Cash  Book. 

Record  in  the  cash  book  the  following  cash  transactions  performed  during  the 
month  of  March  by  C.  U.  Steele,  a  retail  shoe  dealer: 

March     i.     C.  U.  Steele  invested  $2,500.00  in  the  retail  shoe  business. 

2.  Bought  from  M.  B.  Arnstine,  for  cash,  stock  of  shoes,  $1,691.42. 

3.  Paid  telephone  service  in  advance  for  three  months,  $20.00. 
Received  $69.85  for  cash  sales. 

5.  Paid  clerk's  salary,  $25.00. 

6.  Received  $10.50  from  R.  L.  Watson  in  full  of  account. 

8.  Paid  Bay  State  Shoe  Co.  $496.81  in  full  of  account. 

9.  Received  $275.40  for  cash  sales. 

12.  Paid  clerk's  salary,  $25.00. 

13.  Paid  $75.00,  premium  on  insurance  policy. 

15.  Paid  Haynes,  Henson  &.  Co.  $387.65  in  full  of  account. 

16.  Received  $12.00  from  C.  A.  Sheppard  in  full  of  account. 

18.  Paid  $8.25  for  stamps  and  stationery. 

19.  Paid  clerk's  salary,  $25.00. 

22.     Received  $72.50  from  J.  C.  Wilson  &  Co.  in  full  of  account. 
24.     Received  $11.50  from  W.  K.  Love  in  full  of  account. 
26.     Received  $581.92  for  cash  sales. 

Paid  clerk's  salary,  $25.00. 
29.     Received  $4.50  from  A.  R.  King  for  merchandise  sold  him  on  the  12th. 
31.     Paid  rent,  $50.00. 

Paid  Cline  Shoe  Co.  $168.42  for  merchandise  purchased  on  the  6th. 

Received  $361.92.  for  cash  sales. 
Cash  balance,  $902.54. 

When  the  abo\e  transactions  have  been  recorded  in  the  cash  book  as  instructed, 
prove  cash  and  rule  the  cash  book.  Open  an  account  on  page  i  of  the  double  sheet 
of  ledger  paper  used  in  Exercises  Nos.  17  and  20  with  C.  U.  Steele,  Capital,  eleven 
lines  below  the  heading  of  the  Sales  account,  an  account  with  Expense  seven  lines 
below  the  heading  of  the  account  with  C.  U.  Steele,  Capital,  and  an  account  with 
Cash  fourteen  lines  below  the  heading  of  the  Expense  account.  Post  the  entries 
in  the  cash  book  to  the  accounts  on  pages  i,  2  and  3  of  the  ledger  sheet,  and  take  a 
Trial  Balance  of  balances. 


56       RECORDING    TRAXSACTIONS  I\  THE  GENERAL  JOURNAL.  | 

§  46.  The  General  Journal  is  a  book  of  original  entrx-  in  wiiich  all  transac-j 
tions  are  recorded  except  those  recorded  in  special  journals.  The  general  journal  i 
is  the  same  as  the  journal  explained  in  §  22,  and  the  ruling  is  the  same  as  the  various; 
illustrations  of  the  journal  gi\en  in  preceding  chapters.  The  term  "general  journal", 
is  applied  to  the  journal  to  distinguish  it  from  the  special  journals  used  for  record-: 
ing  transactions  affecting  the  same  account. 

When  purchases  are  recorded  in  the  purchases  journal,  sales  in  the  sales  journal,! 
and  cash  receipts  and  payments  in  the  cash  book,  all  other  transactions  are  re- 1 
corded  in  the  general  journal.  These  transactions  may  be  classified  into  five  groups:! 
(i)  opening  entries;  (2)  current  entries;  (3)  correcting  entries;  (4)  adjusting 
entries;    (5)   closing  entries.  i 

^  I.  Opening  entries  are  those  necessary  to  open  accounts  with  the  proprietor 
for  his  investment  and  the  assets  invested  or  liabilities  assumed  by  the  business. 
If  cash  is  the  only  asset  invested,  the  opening  entry  may  be  made  in  the  cash  book; I 
but  if  assets  other  than  cash  are  invested,  it  will  be  made  in  the  general  journal. 
The  opening  entry  in  the  journal  requires  a  debit  to  the  account  with  each  asset: 
invested  and  a  credit  to  the  owner's  Capital  account  for  the  total;  also  a  debit j 
to  the  owner's  Capital  account  for  any  liabilities  assumed  and  a  credit  to  the' 
account  with  each  liability.  j 

Illustration.  January  1st  J.  C.  Shook  began  the  retail  shoe  business.  He  invested  cash,  $500.00, 
merchandise,  $425.65,  and  an  account  due  him  from  W.  H.  Barton  for  $221.75.  His  Capital  account 
will  be  credited  with  the  cash  in  the  cash  book,  but  it  will  be  necessary  to  enter  the  value  of  the  I 
merchandise  and  account  in  the  general  journal.  The  general  journal  entry  is  Purchases,  Dr.,  $425.65;! 
W.  H.  Barton,  Dr.,  $221.75;  and  J.  C.  Shook,  Capital,  Cr.,  $647.40,  with  the  appropriate  explana-j 
tion. 

^2.  Current  entries  are  those  necessary  to  record  transactions  which  occur! 
in  the  regular  operations  of  the  business.  When  the  nature  of  these  is  such  that! 
they  can  not  be  recorded  in  the  special  journals,  it  is  necessary  to  record  them  in 
the  general  journal.  Current  entries  which  may  be  recorded  in  the  general  journal 
include  returned  sales,  returned  purchases,  credits  to  customers  when  assets  other] 
than  cash  are  received  in  payment  of  accounts,  and  debits  to  creditors  when  assets.; 
other  than  cash  are  given  in  payment  of  accounts. 

Illustration.     May  12th  George  A.  Douglas  purchased  from  the  Potter  Shoe  Co.  two  pairs 
shoes  at  $8.50,  with  the  privilege  of  returning  one  pair  within  five  days.     His  account  was  debited 
in  the  sales  journal  with  $17.00,  the  value  of  the  shoes.     May  15th  he  returned  one  pair  and  asked 
for  credit  for  $8.50.     The  entry  required  in  the  general  journal  is  Sales,  Dr.,  $8.50,  and  George  A.  j 
Douglas,  Cr.,  $8.50,  with  the  appropriate  explanation. 

^  3.  Correcting  entries  are  those  which  are  necessary  because  of  errors  in  ' 
recording  or  posting  transactions.  If  an  error  is  made  in  the  calculations  of  a  salei 
and  the  customer  is  charged  $10.00  in  excess  of  the  amount  ot  the  sale,  the  correct- j 
ing  entry  in  the  journal  will  require  a  debit  to  the  Sales  account  and  a  credit  to  the] 
account  with  the  customer.  If  a  sale  is  recorded  correctly,  but  posted  to  the  ! 
account  with  a  customer  other  than  the  one  who  made  the  purchase,  the  correcting : 
entry  in  the  journal  will  require  a  debit  to  the  account  with  the  customer  who ' 
made  the  purchase  and  a  credit  to  the  account  with  the  customer  who  was  debited  ] 
in  error. 

Illustration.  April  i6th  C.  A.  IMoore  purchased  from  Dawes  Bros.,  retail  tire  dealers,  two 
32  X  33H  Fisk  cord  tires  at  $22.75.  The  transaction  was  recorded  in  the  sales  journal  by  the  book- 
keeper for  Dawes  Bros,  but,  through  an  error,  was  extended  as  $47.50  instead  of  $45.50;  hence  Mr. 
Moore's  account  is  charged  with  an  amount  in  excess  of  the  agreed  purchase  price  of  the  tires.  Later 
Mr.  Moore  reported  the  error  and  asked  the  bookkeeper  to  credit  his  account  with  the  amount  of 
the  excess  charge.  The  entry  can  not  be  made  in  the  purchases  journal  because  nothing  was  pur- 
chased; it  can  not  be  made  in  the  sales  journal  because  the  Sales  account  is  credited  for  the  total  of 
the  amounts  entered  in  it;  it  can  not  be  made  in  the  cash  book  because  no  cash  was  received  or  paid. 
The  general  journal  entry  will  be  Sales,  Dr.,  $2.00,  and  C.  A.  Moore,  Cr.,  $2.00,  with  the  appropriate 
explanation. 


RECORDL\G  TRANSACTIONS.  57 

%  4.  Adjusting  entries  are  those  necessary  to  transfer  the  balance  of  one 
account  to  another,  and  to  place  in  the  ledger  assets  belonging  to  the  business 
but  not  shown  in  the  ledger,  and  liabilities  owed  by  the  business  but  not  shown 
in  the  ledger.     These  will  be  explained  and  illustrated  in  subsequent  chapters. 

TI  5.  Closing  entries  are  those  necessary  to  transfer  the  balance  of  those 
accounts  showing  the  profits  and  losses  to  the  owner's  Capital  account  in  order 
that  it  will  show  the  net  profit  or  loss.  These  will  be  explained  and  illustrated  in 
subsequent  chapters. 

TI  6.  Posting  from  the  General  Journal.  Each  amount  entered  in  the  debit 
column  is  posted  to  the  debit  side  of  the  account  written  on  the  same  line  with  it. 
Each  amount  entered  in  the  credit  column  is  posted  to  the  credit  side  of  the  account 
written  on  the  same  line  with  it.     The  process  is  the  same  as  that  given  in  §24. 

Exercise  No.  24,  Purchases  Journal,  Sales  Journal,  General  Journal,  and 

Cash  Book. 

Record  in  the  purchases,  sales  (Illustration  No.  19),  and  general  journals  and 
the  cash  book,  the  following  transactions  performed  during  the  month  of  February 
by  Donald  D.  Sells,  a  retail  hardware  merchant: 

Feb.     I.     Donald  D.  Sells  invested  $3,000.00  in  the  hardware  business. 

2.  Bought  from  Moore  &  Moore,  City,  on  account,  merchandise,  $187.65. 

Enter  in  the  purchases  journal  as  Purchase  No.  I  and  number  succeeding  entries  in  this 
journal  in  regular  order. 

3.  Sold  J.  C.  Mason,  City,  on  account,  four  kegs  nails  at  $4.50  each. 

4.  Paid  Davis  Bros.,  City,  $281.36  for  a  cash  purchase  of  merchandise. 
Enter  on  the  payments  side  of  the  cash  book  as  a  debit  to  the  Purchases  account. 

5.  Paid  $25.00  telephone  rent  for  three  months  in  advance. 

6.  Bought  from  the  Pickering  Hardware  Co.,   Dan^'ille,  on  fifteen  days' 

time,  merchandise,  $321.97. 
Paid  Moore  &  Moore  $100.00  on  account. 

8.  Received  $116.50  for  cash  sales. 

9.  Sold  Walter  Love,   Riverside,   on   account,   one  saw,   $5.00;    one  corn 
sheller,  $37.25. 

10.  Bought  from  Johnson  Bros.,  Dayton,  on  fifteen  da\'s'  time,  merchandise 

$261.85.^ 
Received  $18.00  from  J.  C.  Mason  in  full  of  account. 

1 1.  Paid  Moore  &  Moore  $87.65  in  full  of  account. 

12.  Sold  J.  C.  Miller,  City,  on  account,  100  lbs.  lead  at  8c;   4  doz.  picks  at 

$14.50  per  doz. 

13.  Received  $106.95  for  cash  sales. 

Gave  Walter  Love  credit  for  $5.00,  value  of  the  saw  sold  him  on  the  9th 
and  returned  by  him  per  agreement. 

15.  Received  $20.00  from  Walter  Love  to  apph-  on  account. 

16.  Paid  clerk's  salary,  $30.00. 

17.  Bought  from  Donaldson  Bros.,  Mooresville,  on  account,  merchandise, 

$321.85. 

18.  Sold  Central  Construction  Co.,  Arlington,  on  account,  3  doz,  shovels 

at  $9.00  per  doz. ;  5  doz.  picks  at  $14.00  per  doz. ;  6  scrapers  at  $38.50 
each. 

{Concluded  on  page  58.) 


58  RECORDING  TRANSACTIONS. 

{Exercise  No.  24 — Contmued  from  page  57.)     ■ 

19.  Paid  Pickering  Hardware  Co.  $321.97  in  full  of  account. 

20.  Received  $15.60  cash  from  Davis  Bros,  for  three  kegs  of  nails  purchased 

from  them  on  the  4th  and  returned  by  us  per  agreement. 
Paid  Johnson  Bros.  $150.00  on  account. 
22      Received  $125.25  for  cash  sales. 

24.  Donaldson  Bros,  have  allowed  us  credit  for  $32.60,  cutlery  purchased 

from  them  on  the  17th  and  returned  by  us  per  agreement. 
Sold  Walter  Love,  Riverside,  on  account,  i  Studebaker  wagon,  $125.00. 
Paid  Johnson  Bros.  $100.00  to  apply  on  account. 

25.  Purchased  from  the  Pickering  Hardware  Co.,  Danville,  on  fifteen  days' 

time,  merchandise,  $127.50. 

26.  Received  $17.25  from  Walter  Love  in  full  for  the  corn  sheller  sold  him 

on  the  9th. 

27.  Received  $121.85  for  cash  sales. 

28.  Paid  rent,  $50.00;   clerk's  salary,  $30.00. 

When  the  above  transactions  have  been  recorded  in  the  four  books  of  original 
entry,  prove  cash  (balance,  $2,365.42)  and  rule  the  cash  book  as  in  Illustrations  Nos. 
22  and  23.  Open  accounts  on  a  sheet  of  ledger  paper  with  Cash  (8),  J.  C.  Mason 
(5),  Walter  Love  (7),  J.  C.  Miller  (5),  Central  Construction  Co.  (5),  Moore  & 
Moore  (6),  Pickering  Hardware  Co.  (6),  Johnson  Bros.  (6),  Donaldson  Bros.  (5), 
Donald  D.  Sells,  Capital  (8),  Sales  (10),  Purchases  (10),  Expense  (8),  allowing  for 
each  account  the  number  of  lines  indicated ;  post  from  the  books  of  original  entry, 
and  take  a  Trial  Balance  of  totals. 

Retain  the  ledger  and  Trial  Balance  for  use  in  Exercise  No.  38. 

Exercise  No.  25,  Purchases  Journal,  Sales  Journal,  General  Journal  and 

Cash  Book. 

Record  in  the  purchases,  sales  (Illustration  No.  20),  and  general  journals  an  "I 
the  cash  book,  the  following  transactions  performed  during  the  month  of  October 
by  H.  A.  Popp,  a  retail  coal  dealer: 

Oct.     I.     H.  A.  Popp  invested  $1,000.00  in  the  retail  coal  business. 

3.  Bought  from  the  Central  Coal  Co.,  Jerseyville,  on  ten  days'  time,  $250.00. 
Enter  in  the  purchases  journal  as  Purchase  No.  i  and  number  succeeding  entries  in  this 

journal  in  reejular  order. 

Sold  J.  C.  Miller,  City,  on  account,  coal  per  Sale  No.  i,  $52.50. 

4.  Bought  from  Davis  Coal  Co.,  Covington,  on  account,  $175.50. 

5.  Paid  $10.00  for  one  month's  telephone  service. 

6.  Bought  from  Jellico  Coal  Co.,  Jellico,  on  fifteen  days'  time,  $362.75. 

8.  Paid  the  Central  Coal  Co.  $100.00  on  account. 
Received  $62.80  for  cash  sales  of  coal. 

9.  Sold  M.  B.  Wallace,  City,  on  account,  coal  per  Sale  No.  2,  $30.50. 

10.  Paid  the  Murray  Drayage  Co.  $104.90,  freight  and  drayage  bills  on  coal 

purchased  and  delivered. 
Received  $151.05  for  cash  sales  of  coal. 

11.  Sold  the  Central  Hotel,  City,  on  account,  coal  per  Sale  No.  3,  $242.50. 

12.  Paid  the  Central  Coal  Co.  $150.00  in  full  of  account. 

13.  Sold  J.  C.  Miller,  City,  on  account,  coal  per  Sale  No.  4,  $16.50. 

15.  Paid  clerk's  salary  for  the  first  half  of  the  month,  $40.00. 
Received  $122.00  for  cash  sales  of  coal. 

16.  Received  $20.00  from  M.  B.  W'allace  on  account. 

18.     Paid  the  Donaldson  Coal  Co.  $400.00  for  coal  delivered  today. 

{Concluded  on  page  5Q.) 


RECORDING  TRANSACTIONS.  59 

{Exercise  No.  25 — Continued  from  page  =iH.) 

20.     Paid  the  Jellico  Coal  Co.  $150.00  on  account. 

The  Jellico  Coal  Co.  has  allowed  us  credit  for  $10.00  overcharge  on  coal 
purchased  on  the  6th. 

22.  Received  $10.50  from  IM.  B.  Wallace  in  full  of  account. 

23.  Sold  the  Central  Hotel,  City,  on  account,  coal  per  Sale  No.  5,  $27.50. 

24.  Bought  from  the  Da\'is  Coal  Co.,  Covington,  on  account,  $209.38. 

25.  Received  $135.65  for  cash  sales  of  coal. 

26.  Allowed  the  Central  Hotel  credit  for  $2.50,  error  in  weight  of  coal  .sold 

them  on  the  23d. 
Sold  M.  B.  Wallace,  Cit>-,  on  account,  coal  per  Sale  No.  6,  $10.00. 

27.  Recei\ed  $200.00  from  the  Central  Hotel  to  apply  on  account. 

29.  Sold  J.  C.  Miller,  City,  on  account,  coal  per  Sale  No.  7,  $40.00. 

30.  Received  $192.80  for  cash  sales  of  coal. 

31.  Paid  rent,  $65.00;   clerk's  salary  for  the  latter  half  of  the  month,  $40.00. 

When  the  above  transactions  have  been  recorded  in  the  four  books  of  original 
entry,  prove  cash  (balance,  $834.90)  and  rule  the  cash  book.  Open  accounts  on  a 
sheet  of  ledger  paper  with  Cash  (8),  J.  C.  Miller  (7).  M.  B.  Wallace  (7),  Central 
Hotel  (6),  Central  Coal  Co.  (6),  Davis  Coal  Co.  (6),  Jellico  Coal  Co.  (6),  H.  A.  Popp, 
Capital  (8),  Sales  (12),  Purchases  (10),  Expense  (8),  allowing  for  each  account  the 
number  of  lines  indicated;  post  from  the  books  of  original  entry,  and  take  a  Trial 
Balance  of  balances. 

Retain  the  ledger  and  Trial  Balance  for  use  in  Exercise  No.  39. 


QUESTIONS 

1.  Describe  in  detail  the  labor  saved  in  recording  one  hundred  sales  of  merchan- 

dise on  account  in  the  sales  journal  instead  of  the  journal. 

2.  Describe  in  detail  the  labor  saved  in  recording  fifty  purchases  of  merchandise 

on  account  in  the  purchases  journal  instead  of  the  journal. 

3.  Can  you  suggest  some  method  of  obtaining  a  copy  of  a  sale  made  to  a  customer 

on  account  w^ithout  writing  twice  the  description  of  the  articles  sold? 

4.  Describe  in  detail  the  labor  saved  in  recording  one  hundred  sales  in  the  sales 

journal.  Illustration  No.  20,  instead  of  the  sales  journal,  Illustration  No.  19, 
provided  you  have  suggested  a  means  of  retaining  a  copy  of  the  items  sold 
without  writing  them  twice. 

5.  When  is  it  advisable  to  record  the  transactions  in  a  cash  receipts  journal  and 

a  cash  payments  journal? 

6.  Is  it  necessary  to  enter  receipts  on  the  left  and  payments  on  the  right  pages 

of  a  cash  book? 

7.  Describe  in  detail  the  method  of  proving  cash. 

8.  Would  you  consider  it  advisable  to  pro\e  cash  before  posting?     Give  reason 

for  your  answer. 

9.  Describe  in  detail  the  method  of  recording  a  purchase  of  merchandise  for 

cash  in  the  cash  book  and  the  purchases  journal. 

10.  Describe  in  detail  the  method  of  entering  a  cash  purchase  in  the  cash  book 

only. 

11.  What  account  is  debited  and  credited  when  the  total  cash  receipts  and  cash 

pa^-ments  are  posted  at  the  end  of  the  month? 

12.  Name  the  account  debited  when  the  total  of  the  purchases  journal  is  posted 

at  the  end  of  the  month.     What  accounts  show  the  credits? 

13.  What  account  is  affected  when  the  total  of  the  sales  journal  is  posted  at  the 

end  of  the  month?    How? 


6o  RECORDING  TRANSACTIONS. 

14.  Why  is  it  necessary  to  post  the  total  of  the  purchases  journal  and  the  total  ot 

the  sales  journal  at  the  end  of  the  month? 

15.  If  the  difference  between  the  two  sides  of  the  cash  book  is  greater  than  the 

cash  on  hand,  what  does  this  indicate? 

16.  If  the  difference  between  the  two  sides  of  the  cash  book  is  less  than  the  cash 

on  hand,  what  does  this  indicate? 

17.  If  you  were  keeping  books  for  a  retail  drug  store  and  the  difference  between 

the  two  sides  of  the  cash  book  was  $10.00  more  than  the  cash  on  hand, 
what  entry  would  you  make  for  this  $10.00? 

i(S.  Have  you  seen  a  cash  register  in  operation?  If  so,  can  you  explain  its  con- 
nection with  the  entries  in  the  cash  book? 

iq.     What  does  the  total  of  the  debit  side  of  the  cash  book  show? 

20.  What  does  the  total  of  the  credit  side  of  the  cash  book  show? 

21.  W'hat  does  the  total  of  the  debit  side  of  the  Cash  account  in  the  ledger  show? 

22.  What  does  the  total  of  the  credit  side  of  the  Cash  account  in  the  ledger  show? 

23.  Will  the  balance  of  cash  on  hand,  as  shown  by  the  cash  book  on  December  31, 

1 92 1,  show  the  same  amount  as  the  balance  of  the  Cash  account  in  the 
ledger  which  shows  a  record  of  cash  transactions  from  January  i,  1921  to 
December  31,  1921? 

24.  What  additional  information,  which  is  not  shown  in  the  cash  book,  does  the 

ow'ner  of  a  business  obtain  from  the  totals  of  the  two  sides  of  the  Cash 
account  in  the  ledger? 

25.  Name  some  of  the  transactions  which   the  bookkeeper  for  a  retail  jewelry- 

business  might  enter  in  the  general  journal. 


* 


Vx 


